New South Wales Supreme Court CITATION : Michalopoulos v Perpetual Trustees Victoria Ltd & Anor [2010] NSWSC 1450 HEARING DATE(S) : 15-18 February 2010; 22-25 February 2010 JUDGMENT DATE : 16 December 2010 JURISDICTION : Equity JUDGMENT OF : White J DECISION : Counsel for the 2nd defendant to bring in short minutes of order in accordance with reasons. CATCHWORDS : CONTRACTS – where plaintiffs mortgaged home to secure loan for speculative property investment – plaintiffs induced by representations made by property developer to whom they were introduced by their son – plaintiffs in position of special disadvantage – plaintiffs signed incomplete loan documents – loan documents completed by plaintiffs' agent with materially false statements as to plaintiffs' occupation, financial position and loan purpose – mortgage originator submitted loan application to finance company to arrange loan – no proper verification of details in loan documents – plaintiffs signed further loan documents containing false statements – plaintiffs defaulted and refinanced with different lender to avoid foreclosure – second loan application contained materially false statements and not properly verified – portion of proceeds of second loan disbursed without plaintiff's authority - TRADE PRACTICES – whether lender engaged in unconscionable conduct in contravention of ss 51AA, 51AB or 51AC of Trade Practices Act 1974 (Cth) - CONTRACTS – whether loan "unjust" under Contracts Review Act – whether lender through agent should have known of false statements in loan applications – whether lender through agent should have known of plaintiffs' position of disadvantage – whether lenders engaged in "pure asset lending" - CONTRACTS – whether mortgage originator engaged in misleading or deceptive conduct in contravention of s 52 of Trade Practices Act by submitting documents containing false representations to lender - CONTRACTS – whether breach of solicitor's retainer to disburse loan proceeds otherwise than in accordance with plaintiffs' directions - TRADE PRACTICES – whether property developer and plaintiffs' son engaged in misleading or deceptive conduct in contravention of s 42 of Fair Trading Act Contracts Review Act 1980 (NSW) Trade Practices Act 1974 (Cth) LEGISLATION CITED : Australian Securities and Investments Commission Act 2001 (Cth) Civil Procedure Act 2005 (NSW) Fair Trading Act 1987 (NSW) Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726; (2007) 13 BPR 24,729 Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41; (2006) 14 BPR 26,369 NMFM Property Pty Ltd v Citibank Limited (No 10) [2000] FCA 1558; (2000) 107 FCR 270 Permanent Trustee Co Limited v O'Donnell [2009] NSWSC 902 Re Hampshire Land Co [1896] 2 Ch 743 Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 Nathan v Dollars & Sense Finance Ltd [2007] NZCA 177; [2007] 2 NZLR 747 Dollars & Sense Finance Ltd v Nathan [2008] 2 NZLR 557 Beach Petroleum NL v Johnson (1993) 115 ALR 411 Begbie v State Bank of New South Wales Ltd (1994) ATPR 41-288 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Elkofairi v Permanent Trustee Co Limited [2002] NSWCA 413; (2003) 11 BPR 20,841 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 Andrews v Racken Pty Ltd [2007] NSWSC 1010 Attorney General (NSW) v World Best Holdings Limited [2005] NSWCA 261; (2005) 63 NSWLR 557 Kowalczuk v Accom Finance Pty Ltd [208] NSWCA 343; (2008) 252 ALR 55 Conkey & Sons Limited v Miller (1977) 51 ALJR 583; (1977) 16 ALR 479 Vink v Schering Pty Ltd (1991) ATPR 41-064 CASES CITED : PSL Industries Ltd v Simplot Australia Pty Ltd [2003] VSCA 7 South Sydney District Rugby League Football Club Limited v News Limited [2000] FCA 1541; (2000) 177 ALR 611 Garnac Grain Company Incorporated v HMF Faure & Fairclough Ltd [1968] AC 1130 Micarone v Perpetual Trustees [1999] SASC 265; (1999) 75 SASR 1 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 Permanent Trustee Company Limited v O'Donnell [2009] NSWSC 902 Bartle v GE Custodians Ltd [2010] NZCA 174 Tobin v Broadbent (1947) 75 CLR 378 Sweeney v Howard [2007] NSWSC 852; (2007) 13 BPR 24,381 Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Butcher v Lachlan Elder Realty (2004) HCA 60; (2004) 218 CLR 592 Murphy v Overton Investments Pty Limited [2004] HCA 3; (2004) 216 CLR 388 March v E & MH Stramare Pty Limited (1991) 171 CLR 506 Winnote Pty Ltd (in liq) v Page [2006] NSWCA 287; (2006) 68 NSWLR 531 Trust Co of Australia v Perpetual Trustees WA Limited (1997) 42 NSWLR 237 Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172 Midland Bank plc v Cox McQueen [1999] EWCA Civ 656 Mercantile Credit Company Limited v Fenwick [1999] EWCA Civ 778 UCB Corporate Services Limited v Clyde & Co [2000] 2 All ER (Comm) 257 Theodoros Michalopoulos (1st Plaintiff; and cross-defendant on 1st & 2nd cross-claims) Aspasia Michalopoulos (2nd Plaintiff; and cross-defendant on 1st & 2nd cross-claims) Perpetual Trustees Victoria Limited (1st Defendant; and cross-defendant on 2nd cross-claim; cross-claimant on 3rd cross-claim) Permanent Custodians Limited (2nd Defendant; and cross-claimant on 1st & 2nd cross-claims) PARTIES : National Lending Solutions (Cross-claimant on 4th cross-claim; cross-defendant on 2nd cross-claim) The Mortgage Group (NSW) Pty Ltd (Cross-claimant on 5th cross-claim; cross-defendant on 2nd, 3rd, 4th & 5th cross-claims) Stefan Allan (Cross-defendant on 3rd & 5th cross-claim) Dennise Allan (Cross-defendant on 3rd & 5th cross-claim) Jeremy Allan (Cross-claimant on the 5th cross-claim) James Michalopoulos (Cross-defendant on 3rd & 5th cross-claim) FILE NUMBER(S) : SC 2006/259872 Plaintiffs: M W Young 1st Defendant: J E Thomson COUNSEL : 2nd Defendant: B J Burke The Mortgage Group: I Griscti National Lending Solutions: N Kabilafkas Plaintiffs: Bransgroves Lawyers 1st Defendant: Kemp Strang SOLICITORS : 2nd Defendant: Hicksons Solicitors The Mortgage Group: Gilchrist Connell National Lending Solutions: Mallesons Stephen Jaques IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WHITE J Thursday, 16 December 2010 2006/259872 Theodoros Michalopoulos & Anor v Perpetual Trustees Victoria Ltd & Anor JUDGMENT 1 HIS HONOUR: On 2 May 2003, the plaintiffs (Mr and Mrs Michalopoulos) borrowed $600,000 from the first defendant ("Perpetual") on the security of a registered first mortgage over their property at Birrell Street, Queens Park. On 11 April 2006 the plaintiffs borrowed $750,000 from the second defendant ("Permanent"). About $606,000 of the advance was used to discharge the Perpetual loan. The plaintiffs have defaulted in making repayments on the Permanent loan. 2 The plaintiffs claim that the conduct of Perpetual in entering into the first loan and taking the first mortgage over the Birrell Street property was unconscionable as a result of which they suffered loss and damage. They seek to recover from Perpetual the sum of $600,000 which they borrowed, plus moneys paid by them from their own pocket to pay interest and costs. They contend that they did not receive any benefit from the first loan or the first mortgage. 3 The plaintiffs contend that the second loan from Permanent and the mortgage over the Birrell Street property given by them to Permanent were unjust contracts at the time they were made within the meaning of s 7 of the Contracts Review Act 1980 (NSW). They seek orders that the second loan and the second mortgage be declared void and that Permanent be required to provide an executed discharge of mortgage. They also seek orders that Permanent refund moneys paid by them from their own resources in connection with the second loan. How the claims arise and the issues 4 The plaintiffs borrowed $600,000 from Perpetual in order to make an investment in a property development at North Parramatta. They were induced to do so by representations made to them by a Mr Stefan Allan that the development would provide a return which would allow the principal and interest on the loan to be repaid and yield a profit to them. The investment opportunity was made known to them by their son, James Michalopoulos. The borrowing of $600,000 was to include a sum to cover the required repayments until the returns from the North Parramatta development were received. 5 The moneys borrowed were paid to Stefan Allan. Shares in a company owning the development and units in a unit trust were issued to the plaintiffs and to James Michalopoulos' company, Distinctive Events Pty Ltd ("Distinctive Events"). The plaintiffs received no return from the development. By 2005 James Michalopoulos believed that much of the money received by Stefan Allan had not been applied towards the development. 6 Stefan Allan agreed to meet the interest payments on the first loan. The moneys raised by the plaintiffs and paid to Stefan Allan included moneys for this purpose. Until February 2005 Stefan Allan either made the interest payments or paid moneys to the plaintiffs or to James Michalopoulos to cover the interest payments. From February 2005 he stopped making the payments. The loan with Perpetual fell into default. On 22 June 2005 Perpetual obtained judgment for possession of the Birrell Street property and judgment for the then outstanding debt of $629,536.04. The plaintiffs were given notice by the sheriff to vacate the property. To avoid eviction the plaintiffs paid $40,897.25 on 19 August 2005. The payment was made from an account of the Michalopoulos Family Trust of which the plaintiffs were trustees. Thereafter Mrs Michalopoulos transferred money from her savings account into the Family Trust account, and from there direct debits were made to pay the interest on the loan. 7 The plaintiffs took advice from a solicitor, Mr Nicholas Karefylakis in about December 2005. On 22 December 2005 Mr Karefylakis advised that the plaintiffs should commence proceedings immediately against all possible defendants. The plaintiffs did not take that advice. In January 2006 Stefan Allan advised the plaintiffs that the North Parramatta development was finished, but the units were slow to sell. Mr Allan advised the plaintiffs to refinance and borrow an extra $150,000 to cover interest for at least two years whilst the units were sold. The plaintiffs took his advice. On 11 April 2006 they borrowed $750,000 from the second defendant (Permanent). $606,189.68 was paid to Perpetual to discharge the first loan. Perpetual's mortgage was discharged. Permanent took a registered first mortgage over the property to secure its loan. $100,000 was paid from the balance of the loan proceeds to a company called Australian Secured Fund Pty Ltd ("Australian Secured Fund"). That company was controlled by Mr Allan. $39,377.32 was paid to the plaintiffs. The balance of the loan was applied in payment of stamp duty, registration fees and other costs and expenses. The plaintiffs say they gave no authority for the sum of $100,000 to be paid to Australian Secured Fund. 8 The plaintiffs pressed Stefan Allan to make the payments on the mortgage. On 18 July 2006 Mr Allan forwarded a cheque drawn on Mortgage Fund (NSW) Pty Ltd for $45,000. The cheque was dishonoured. The plaintiffs made monthly payments on the second loan up to 11 October 2006. Stefan Allan made two payments directly to Permanent: one in June 2006 and the other in November 2006. The plaintiffs commenced these proceedings on 24 November 2006 and have not made any payments of interest or repayments of principal since that time. Permanent seeks judgment for the debt outstanding on the loan and judgment for possession. 9 In their statement of claim the plaintiffs sought declarations and orders pursuant to s 7(1)(b) of the Contracts Review Act in respect of both the first loan and the first mortgage to Perpetual and the second loan and the second mortgage to Permanent. Perpetual pleaded that the judgment of 22 June 2005 created an estoppel which precluded the plaintiffs from contending that the first loan and the first mortgage were void. No steps had been taken to set aside the default judgment. Although the judgment was given in default of appearance, it conclusively determined that the first mortgage was not void ab initio and created a judgment debt (Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726; (2007) 13 BPR 24,729 at [41]). This was accepted by counsel for the plaintiffs. The plaintiffs did not press their claim for relief under the Contracts Review Act. At the hearing, they amended the statement of claim and claimed damages against Perpetual pursuant to s 51AA, s 51AB or s 51AC of the Trade Practices Act 1974 (Cth). They allege that Perpetual engaged in unconscionable conduct that occasioned loss or damage in that they incurred the debt of $600,000 to Perpetual and the obligation to pay interest and costs without receiving any benefit from the first loan or the first mortgage. 10 Perpetual was the trustee of trusts known as Millennium Trusts through which funds are raised to be lent on first mortgage security under programs provided by Interstar Wholesale Finance Pty Ltd (now called Challenger Mortgage Management Pty Ltd). According to Mr Graeme Wort, the Head of Originator and Mortgage Services of Challenger Mortgage Management Pty Ltd, that company is a wholesale finance company which arranges loans from Perpetual as trustee of the Millennium Trusts to borrowers who apply through third parties known as mortgage originators. According to Mr Wort, Challenger Mortgage Management Pty Ltd and Perpetual are parties to trust deeds along with a financial institution which finances the trusts. No trust deed was tendered. In the present case the plaintiffs' loan application was submitted to an associated company of Interstar Wholesale Finance Pty Ltd, Interstar Securities (Australia) Pty Ltd ("Interstar"), by The Mortgage Group (NSW) Pty Ltd ("The Mortgage Group"). The Mortgage Group is a cross-defendant. It was a party to an agreement called a Loan Origination and Management Agreement with Interstar. The recitals to the Loan Origination and Management Agreement state that Perpetual and Interstar had established mortgage-backed securities programs for the purpose of, amongst other things, investing in mortgage loans and other assets, and that Interstar assisted Perpetual in the management of such programs. The Loan Origination and Management Agreement sets out The Mortgage Group's obligations in submitting loan applications to Interstar and carrying out credit checks. The plaintiffs contend that The Mortgage Group was Perpetual's agent and that its knowledge is to be imputed to Perpetual. 11 The Mortgage Group occupied a similar position in relation to Permanent. Permanent is a trustee of a mortgage fund known as ARMS II. Australian Mortgage Securities Ltd ("AMS") is the trust manager for Permanent. It delegated its functions to AFIG Wholesale Pty Ltd ("AFIG"). Pursuant to that delegation AFIG exercises certain of the powers and discretions and obligations that AMS has as trust manager for Permanent. On 6 April 2005 AMS, AFIG and The Mortgage Group entered into an agreement called the AFIG Wholesale Correspondent Deed whereby The Mortgage Group was permitted to submit loan applications to AFIG and was required before doing so to undertake certain processes to verify the application and make a credit assessment. The plaintiffs contend that The Mortgage Group was an agent of Permanent and its knowledge should be imputed to Permanent. 12 Stefan Allan was a director of The Mortgage Group up to 15 January 2003. The other director was his brother, Jeremy Allan. After Stefan Allan retired as a director, Jeremy Allan was the sole director of The Mortgage Group. According to Jeremy Allan, he and his brother had a falling-out in around December 2002 and he, Jeremy Allan, bought out Stefan Allan's shareholding in The Mortgage Group and became the sole director of the company. He deposed that at the same time, The Mortgage Group wound up its mortgage broking business and instead started a new business as a mortgage originator and mortgage manager for Interstar. 13 Until December 2002 Jeremy Allan and Stefan Allan were in partnership conducting a business called The Property Group. Jeremy Allan described the business of The Property Group as being the sale of property on behalf of developers, apparently like a real estate agent, but without a real estate agent's licence (T368). He said that he ceased his involvement in the business of The Property Group in December 2002 when he and his brother went their separate ways. 14 Although served as a cross-defendant Stefan Allan did not appear. No party called him to give evidence. He has not given evidence to rebut the allegations of fraud made against him, but that because he elected not to appear and defend his actions. 15 The loan applications signed by the plaintiffs in the form they were submitted by The Mortgage Group in April 2003 to Interstar, and in the form in which they were submitted by The Mortgage Group to AFIG in March 2006, contained materially false information. The type of loan applied for was what Interstar called a "Latinum loan" and what AFIG called a "Fastdoc" loan. These loans were described in the respective operations manuals as being available to self-employed borrowers. In each case the borrowers were not required to provide verification of their stated income (other than any PAYG income). The stated intention was that the loans be available for self-employed borrowers who were unable to provide current financial statements or income tax returns. A self-employed borrower who could provide verification of his or her income and who otherwise qualified for a loan could borrow at lower interest rates than applicable to "Latinum" or "Fastdoc" loans. 16 The plaintiffs were not self-employed. Mr Michalopoulos was employed at Telstra until December 2005. Mrs Michalopoulos retired from working for Telstra on 22 December 2001. They also had tax returns from which their income could have been verified. However, their income was insufficient to meet the repayments on either a $600,000 loan or a $750,000 loan. In the year ended 30 June 2003 their combined income before tax was a little over $60,000. 17 In 2003, the loan application forms as provided to The Mortgage Group, and submitted by The Mortgage Group to Interstar, stated that the plaintiffs were self-employed and carried on a business of drycleaners, and that each of the plaintiffs earned an income of $100,000 per annum. These statements were false. The loan application forms also stated that the purpose of the $600,000 loan was to refinance an existing loan of $600,000 taken out by the plaintiffs with The Property Group. This statement was also false. There was no such loan. The loan application forms containing these statements bear the plaintiffs' signatures. It was their evidence that they were rushed into signing the application forms by Stefan Allan who told them that the forms were blank and would be completed by him. The plaintiffs say that they were not shown what they were asked to sign. The plaintiffs gave evidence that they were presented with a bundle of papers and told where to sign. As they appended their signatures to each page, the page was turned over and they could not see what they were signing. 18 The plaintiffs signed some documents in relation to the application for the second loan in January 2006. Parts of the documents submitted for the second loan application were evidently produced by someone, presumably Stefan Allan, whiting out parts of the earlier loan application and writing in different information. The second loan application also contained false statements that the plaintiffs were self-employed and carried on a dry-cleaning business. It falsely stated that Mr Michalopoulos' income was $200,000 per annum. (Mrs Michalopoulos was stated not to have an income.) The application for the second loan stated that the purpose of the loan was partly to refinance the loan from Perpetual (which was true) and partly to finance expenditure of a "personal domestic or household nature", which was false. 19 The plaintiffs contend that the lenders, through their agent The Mortgage Group, knew, or at least should have known, that the loan applications contained the false statements. They contend that the lenders, through The Mortgage Group, knew, or should have known, that the loan was taken out primarily for the benefit of Stefan Allan and that the loan application did not correctly record the purpose of the loan, the income of the borrowers or their prior business experience. The plaintiffs contend that they were under a number of disadvantages with respect to entering into the loans by reason of problems with language, education, financial experience, and by having been prevailed upon by their son James, who was in business with Stefan Allan. The plaintiffs say that they suffered a significant disadvantage or disability by the trust they placed in Stefan Allan and were vulnerable to his persuasion. They contend that the lenders, through The Mortgage Group, knew, or should have known, of such disadvantage. 20 In the case of the Perpetual loan, the plaintiffs contend that Perpetual, through its agent, took unconscientious advantage of their disability. The plaintiffs say that the Permanent loan was unfair in the circumstances in which the contract was entered into. In relation to both loans the plaintiffs plead that the defendants engaged in the practice of "pure asset lending", namely, lending money without regard to the plaintiffs' ability to repay by instalments in the knowledge that adequate security was available in the event of default. In relation to both loans the plaintiffs plead that the lenders, through their agent, knew that the loans were taken for the purpose of an improvident and speculative investment. 21 Perpetual and Permanent deny these allegations. The defendants contend that the plaintiffs either knowingly misrepresented their income, occupation and the purpose of the loan, or were recklessly indifferent to the truth of whatever information Stefan Allan might insert in the forms they signed. The defendants and The Mortgage Group deny that The Mortgage Group knew, or had notice, that any of the statements in the loan application forms were false or that the loans were taken for an improvident and speculative investment. 22 There is a separate issue concerning the disbursement of $100,000 from the proceeds of the second loan to Australian Secured Fund. The plaintiffs were given leave to amend their particulars of their allegation that the second loan and the second mortgage (to Permanent) were unjust contracts within the meaning of s 7 of the Contracts Review Act by adding as a particular that the sum of $100,000 was paid to Australian Secured Fund without the plaintiffs' authority. The plaintiffs did not plead an independent cause of action apart from the Contracts Review Act in relation to the allegedly unauthorised payment. 23 The allegation that the payment was made without authority had been flagged in particulars. Permanent brought a cross-claim against the solicitor retained to act for it on the loan to the plaintiffs. The solicitor is National Lending Solutions Pty Ltd ("National Lending Solutions" or "NLS"). Permanent alleged that it was a term of the solicitor's retainer that it not disburse the proceeds of the loan other than in accordance with the plaintiffs' instructions. National Lending Solutions disbursed the sum of $100,000 to Australian Secured Fund on the instructions of The Mortgage Group. Permanent alleged that if it is unable to recover any sum from the plaintiffs as the result of a finding that part of the proceeds of the advance were disbursed otherwise than in accordance with the plaintiffs' instructions, then it is entitled to recover from National Lending Solutions the amount which it is otherwise not entitled to recover from the plaintiffs. 24 Both Perpetual and Permanent filed cross-claims against The Mortgage Group. National Lending Solutions also claims indemnity from The Mortgage Group if it is liable to Permanent. Perpetual and The Mortgage Group also filed cross-claims against James Michalopoulos, Stefan Allan and Dennise Allan. Dennise Allan is Stefan Allan's wife. She was employed on a casual basis by The Mortgage Group. There was no appearance by Stefan Allan or Dennise Allan. James Michalopoulos made no submissions. He gave evidence in the plaintiff's case. Further Background Information – The Role of James Michalopoulos 25 After earlier failed business ventures, James Michalopoulos became involved in the finance industry in about April 2002. From about that time he worked with a Mr Hans Schmidt in a business involving training people to become accredited mortgage brokers. He was paid a commission for the number of prospects he persuaded to attend seminars. He attended some of the seminars himself. James Michalopoulos deposed that in 2002 he learned a great deal about the mortgage business. From about the beginning of 2003 James Michalopoulos with Mr Schmidt carried on the business of providing training services for potential financial brokers. James Michalopoulos's role was to recruit the brokers. They registered a business name "The Mortgage Academy" under which they carried on business through their respective companies. James Michalopoulos owned the shares in Distinctive Events which was one of the partners in the business. James Michalopoulos deposed that the partnership carried on business under the name The Mortgage Academy for about four to six months commencing in the beginning of 2003. He became familiar with the various criteria applied by Interstar for its lending programs (T35). 26 In about February 2003 James Michalopoulos was introduced to Stefan Allan. Stefan Allan told him that he had two very good properties in North Parramatta for which he had submitted development applications and that he was looking for "seed capital" to get the development applications through and to get construction underway. Stefan Allan told him that he would be able to obtain finance for the rest of the development. Stefan Allan told him that he, Stefan Allan, was experienced and successful in the property development business as well as having been involved in finance broking. Stefan Allan told him that he now left finance broking to his brother Jeremy. Stefan Allan said that he would put together a feasibility study showing a detailed cash flow and profit analysis for the project. James Michalopoulos said that his parents had some equity in their house they might draw on if the deal were a good one. In a later meeting Stefan Allan told James Michalopoulos that he could make James' parents equity shareholders and, as a back up, would provide them with a guarantee of a 25 percent return on their money over the course of the project. 27 In early March 2003 Stefan Allan provided the plaintiffs and James Michalopoulos with what James called "a pile of documents relating to the project including plans". Amongst the documents were documents called a "Project Feasibility Study". These projected a gross profit on the property at Bellevue Street, North Parramatta (involving the construction of six units) of $887,000 and a net profit on a development at Bowden Street, North Parramatta (involving the construction of nine townhouses) of $1,171,180. The "feasibility studies" consisted of nothing more than single-page documents containing estimates of projected sales and one-line statements of expenses. 28 In March 2003 Stefan Allan met Mr and Mrs Michalopoulos with James Michalopoulos. In the course of that meeting Stefan Allan told them that all units in the development would be pre-sold before construction commenced and that there would be no risk in getting the profit out at the end. He said that there was already $1 million of equity in the project, so that the plaintiffs would not be at risk if they mortgaged their house to raise capital to invest in the project. He said that he would personally guarantee the return of the plaintiffs' principal plus a 25 percent return. In answer to a question from Mr Michalopoulos as to how the interest on a borrowing by the plaintiffs would be paid, Stefan Allan said that: " We will borrow more than we need for the project and I will pay the interest with the surplus. That way you won't have to worry about the mortgage at all until the project is finished then it will be paid back. " 29 After the loan was drawn down on 2 May 2003 Stefan Allan provided documents to Mr and Mrs Michalopoulos and James Michalopoulos to record their investment in the project. These included documents headed "Undertaking to Investment". These recorded that the plaintiffs had made investments of $600,000 with companies called Blue Star Property Holdings Pty Ltd and Lords Holdings Pty Ltd, which were described as the developers of the properties at Bowden Street and Bellevue Street North Parramatta. The "undertakings" were signed by Mr and Mrs Michalopoulos, by Mr Allan in his personal capacity, and by Mr Allan for each company. They included terms that "For the duration of the development ... the Investor [Mr and Mrs Michalopoulos] is willing to invest $600,000". Mr Allan was named as the company's "representative". Each undertaking included a term that: " The Investor understands the representative may elect to use the funds for any matter it seems as Personal or Business at the total discretion of the representative. The investor agrees irrevocably. " 30 Each undertaking included a term that the investor was entitled to 15 percent of the total project profit with a minimum of 25 percent per annum return on the investment. It included some other terms which are incomprehensible (e.g. "1.4 The investor agrees any interest payment made by the representative or 'DLP' will be deducted from the overall principal and interest" and "1.8 The representative and its company Blue Star Property Holdings Pty Ltd ..., also undertake that any option the development at ... Bowden Street, North Parramatta pass resolution and nominate the investor as the new option holder. 1.9 The investor agrees that 1.8 is only enforceable if the expire is not resolved, unless otherwise stated in writing by the investor.") Mr Allan also provided copies of caveats signed under the common seal of Blue Star Property Holdings Pty Ltd and Lords Holdings Pty Ltd by which those companies consented to the plaintiffs' lodging a caveat claiming an interest in the properties as "Equity interest & investment in company development known as 'Bowden Street North Parramatta' or 'Bellevue Street North Parramatta'". 31 In addition, the plaintiffs were issued with 15 shares in Blue Star Property Holdings Pty Ltd (representing 15 percent of the capital of that company) and were given a certificate that they held 15 units in a trust of which Lords Holdings Pty Ltd was trustee. 32 After the loan settled James Michalopoulos worked with Stefan Allan on the developments. 33 Prior to the first loan being taken James Michalopoulos became aware of at least some of the requirements of lenders. He denied knowing that his parents would not be eligible to satisfy the lending criteria for a proposed loan of $600,000. I do not accept that denial. He admitted in cross-examination that he knew that a lender would require to be satisfied that his parents could afford to meet the payments under the loan and he was aware that they were not in a position to do that (T37). He said that he was quite baffled as to how his parents could get the loan (T49) but accepted Stefan Allan's assurance that there was an over-borrowing to cover interest and that his parents would not need to cover any of the interest payments and the loan would be repaid through the development (T49). I consider that James Michalopoulos was aware that the reason application was made for a "Latinum declaration loan", that is, a loan in which his parents' income would not need to be verified, was because the loan amount sought to be borrowed would not have been available had a true statement of his parents' income been provided. 34 However, it does not follow that because this was a matter known to James Michalopoulos that it was also known to his parents. Nonetheless, as will be seen, I am satisfied that Mr and Mrs Michalopoulos signed the loan applications knowing that the information to be provided in the application as to their income and the purpose of the loan was false. 35 It emerged in cross-examination of Jeremy Allan that The Mortgage Group paid commission to James Michalopoulos or on his direction for the first loan to his parents. The commission paid was 0.5 per cent or $3,300 including GST. 36 Jeremy Allan gave inconsistent evidence about how the loan application was referred to The Mortgage Group. He gave evidence in cross-examination (T381-382) that he was aware that it was a requirement for access to the Latinum loan programme that the borrowers were unable to provide financial statements or taxation returns. He did not take any steps himself to ensure that that was the case in the instance of the plaintiffs. When asked why not, Jeremy Allan said: " Under the introducer agreement with my brokers, I deal with them and they deal with the clients and they all went through extensive training so everything you see here is everything they knew anyway, it is part of my product parameters and part of our, just part of our product parameters and the steps they needed to take. " He called the broker an "accredited introducer". Initially Jeremy Allan said that the accredited introducer in the case of the plaintiffs' application for a loan by the plaintiffs was The Mortgage Fund (Australia) Pty Ltd. He named six people, including Stefan Allan and James Michalopoulos as being the directors or partners of that company. That company was not incorporated until 31 March 2004. His ultimate position was that Distinctive Events was an accredited introducer to The Mortgage Group and introduced the plaintiffs' loan application to The Mortgage Group. 37 Under clause 3.3 of The Mortgage Group's Loan Origination and Management Agreement with Interstar, The Mortgage Group agreed not to sub-contract or arrange for any person (other than its employees) to attend to any of its obligations under the agreement without Interstar's written consent. No consent, written or otherwise, was given by Interstar to The Mortgage Group's appointing Distinctive Events or James Michalopoulos or The Mortgage Fund (Australia) Pty Ltd as an accredited introducer. Signing of application and related documents for the Perpetual loan 38 Mr and Mrs Michalopoulos signed loan documents for the first loan on two separate occasions. The first occasion was on 11 April 2003. According to Mr and Mrs Michalopoulos and James Michalopoulos, the forms were blank and Stefan Allan said that he would fill out whatever needed to be filled out in the office. Some parts of the forms were filled out by James Michalopoulos that evening. This included details of his parents' names, addresses and driver licence numbers. The plaintiffs say, and I accept, that when they signed the part of the form which set out the purpose of the proposed loan, the part was blank. The plaintiffs signed a page headed "Latinum Declaration of Financial Position". This part of the form included a section requiring the completion of the borrowers' occupations and income. The document stated that the plaintiffs' occupation was that of drycleaner and that they were both self-employed having a net income of $100,000 each. The plaintiffs and James Michalopoulos say, and I accept, that these parts of the form were left blank when they signed it. The plaintiffs left it to Stefan Allan to fill in these details. They were aware that in signing the declarations they were personally certifying the truth of the information to be inserted. 39 Another part of the form (which was not signed or initialled by the plaintiffs) contained a section for a statement of the plaintiffs' occupation and income. I accept the plaintiffs' evidence and James Michalopoulos' evidence that that section was not completed at the time the form was signed. 40 Another page of the form, which was signed by Mr and Mrs Michalopoulos, was headed "Statement of Assets and Liabilities". James Michalopoulos filled out some of the items, namely, the statement of assets for sections headed "Home", "Car", "Furniture, jewellery etc", and "Superannuation funds". These were all of the assets of substance of the plaintiffs and had a total value of $1,745,000. He left the total blank. He left the section for liabilities blank. The plaintiffs had no liabilities. Mr and Mrs Michalopoulos signed the declaration with the totals of assets and liabilities left blank. Subsequently, someone, I infer Stefan Allan, added in a box for "Business value" an amount of $200,000 and described the business as "cleaning". He also included as a liability a debt of $600,000 said to be owed under an existing mortgage to The Property Group with monthly payments of $5,000. He completed the totals. These statements were false. 41 The result was that the loan application documents submitted to The Mortgage Group contained false statements: (a) that the plaintiffs had a gross income of $100,000 each; (b) they were self-employed and had carried on a dry-cleaning business for 10 years; (c) the business had a value of $200,000; and (d) the purpose of the loan was to refinance an existing mortgage of $600,000 to The Property Group under which they made monthly payments of $5,000. 42 On 16 April 2003 the loan application containing these statements was submitted by The Mortgage Group to Interstar. The loan was approved by Interstar. After Interstar approved the loan further documents were prepared by its settlement agent (in this case First Title Secure). These included the mortgage and numerous other documents, including one entitled "Applicant's Financial Summary", and others addressed to The Property Group entitled "Request to Provide Payout Statement", "Discharge Notice" and "Undertaking to Make No Further Drawings". All of the documents were signed by the plaintiffs on 29 April 2003. The plaintiffs say that they signed these documents without reading them. Mr Michalopoulos said that Stefan Allan obtained his and his wife's signatures and held the documents in a bundle so that the top of half of the pages were obscured as they were required to sign at the foot of the relevant pages. Mr Michalopoulos also said that on this occasion Stefan Allan told him that he would fill in what was needed (T224). Mrs Michalopoulos also suggested that the "Applicant's Financial Summary" was blank (T148, 149). I reject that evidence. Whatever may have been the position with the documents filled out by Stefan Allan, the documents signed on 29 April 2003 were not prepared by him but by First Title Secure. They were not blank and were not completed by Stefan Allan after the plaintiffs signed. 43 The "Applicant's Financial Summary" stated: " Loan Amount: $600,000 You have provided to the Lender details of your current income, expenses, and commitments together with details of your assets and liabilities. These details have been used in the Lender's assessment of your loan application and your ability to meet your obligations in relation to the loan. Set out below is a summary of these details and we request that you confirm that these figures are a complete and accurate summary of your current financial situation. If there is an error in the details set out below, you must advise the Lender immediately. " There was then a table of expenses and income. The expenses included: " Income tax $71,760 ." The income was described as: " Salary (gross pre-tax) $200,000. " Immediately above the plaintiffs' signatures in bold type was the following sentence: " I/We declare that the above is a complete and accurate summary of my/our current financial position and I/we believe that I/We can meet my/our obligations under the loan. " 44 I do not accept the evidence of either plaintiff that they were not able to see, or did not see, the figures for income and expenses shown on the financial summary which they declared by their signatures to be accurate. Mrs Michalopoulos' evidence was that she could not understand the words on that page. Mrs Michalopoulos was an unsatisfactory witness. She was understandably upset by the circumstances of the loan and the failure of Stefan Allan to meet his promises. That coloured all her evidence. Her answers were frequently unresponsive and in some cases, in my view, deliberately so. From time to time she professed an inability to understand or even to see the words on documents before her. Whilst English is not her first language I am satisfied that she was able to understand the table of expenses and income and that she understood she was declaring it to be accurate. 45 In the case of the Applicant's Financial Summary, I am satisfied that both she and Mr Michalopoulos saw and understood that they were declaring that they had a combined income of $200,000 per annum. The fact that they were prepared to sign the document containing that representation corroborates an inference which I might not otherwise have been prepared to draw that when the plaintiffs signed the initial loan application they expected that Stefan Allan would include false statements as to their income on the form. The plaintiffs were both aware that they did not earn sufficient income to service the loan. They were relying upon Stefan Allan's assurance that the amount borrowed would be sufficient to cover interest payments until the loan was repaid from the proceeds of the property development. The effect of Mr Michalopoulos' evidence, particularly when cross-examined in relation to the second loan, was that whilst he understood that his and his wife's income would be insufficient to make the loan repayments, and whilst he would expect that a lender would need to be satisfied that the borrowers had the capacity to repay the loan, nonetheless he assumed that Stefan Allan would provide truthful information to the lenders to explain how the loan repayments would be met, that is, by using part of the advance to pay interest and repaying the loan from the proceeds of the property development. However, I do not accept that evidence. If that were the position, Mr and Mrs Michalopoulos would not have signed the financial summary on 29 April 2003 which contained the false statement of their income. I conclude that they were aware that the loan would be obtained by false statements being made to the lender about their income. 46 A further indication that the plaintiffs knew that the loan application would contain false statements is the manner in which the Statement of Assets and Liabilities was filled out on 11 April 2003. The document as ultimately filled out stated that the plaintiffs' assets had a value of $1,950,000 and that they had a liability of $600,000 to The Property Group. According to the plaintiffs and James Michalopoulos, the values of assets were discussed and completed at the meeting at the plaintiffs' house when James Michalopoulos and Stefan Allen were present. The items completed stated values of their home ($1,250,000), motor vehicles ($15,000), furniture, jewellery etc ($150,000), savings at bank ($30,000) and superannuation funds ($300,000). The sum for the total value of assets was left blank and the column for liabilities was also left blank. As I have said, subsequently Stefan Allan added a value of $200,000 for the value of a cleaning business and included the liability of $600,000 to The Property Group. There is no explanation as to why, after the values of all of the plaintiffs' assets were set down, the sum to be filled out as the total of the assets was left blank. I conclude that the plaintiffs expected Stefan Allan to add to the document otherwise than by completing the total. He could only do so by adding false information. 47 There is corroboration for this conclusion in the form signed by Mr and Mrs Michalopoulos on 29 April 2003 directed to the Manager, The Property Group, requesting a payout statement, stating that its loan was to be refinanced by Perpetual and requesting it to prepare necessary discharge documents, and undertaking to The Property Group that the plaintiffs would make no further drawings. Mr Michalopoulos' evidence was that the documents were folded over in such a way that it was not possible to see what was on the top half of the page, and this, coupled with the speed with which their signatures were required, meant that he did not know what he was signing. That explanation cannot apply in relation to the document headed "Undertaking to Make No Further Drawings". That document did not occupy a full page. Mr and Mrs Michalopoulos' signatures were placed just below the statement addressed to The Property Group authorising and directing it to allow "no further drawings to be transacted on the following account(s)". I do not see how they could have signed that page without reading what was above their signatures, even if that was a possibility in relation to some of the other documents. 48 I conclude that the plaintiffs were aware that the loan was obtained through a false statement to the lender that the loan was to be used to discharge their liability to The Property Group. 49 James Michalopoulos knew that a lender would not be prepared to make a loan of $600,000 to his parents if a true statement were made as to his parents' income. In cross-examination he accepted that he knew that lenders needed to be satisfied that the borrower could afford to meet the payments under the loan. He was driven to accept that it was evident to him that his parents were not in the position to satisfy a lender that they could service a $600,000 loan (T37). Having regard to his exposure to the finance industry, it is probable that James Michalopoulos was aware that the "low doc" loan that his parents were taking was not designed for applicants in their position, and that the true purpose of moneys being invested in a property construction in apartments and townhouses would not be an approved purpose for that type of loan. Despite his denial I consider that he understood that the reason the application form was not completed before his parents was because, if the true position were revealed, he knew the loan would not be approved. The Mortgage Group's assessment of the loan application 50 It was part of the plaintiffs' pleaded case that both Jeremy Allan and Stefan Allan were agents of The Mortgage Group and that Stefan Allan's knowledge was to be attributed to The Mortgage Group and through it to the lenders. In final submissions counsel for the plaintiffs accepted that only Jeremy Allan was acting for The Mortgage Group and only his knowledge should be attributed to it in relation to either the first or second loan (T531). That concession was rightly made. Stefan Allan's involvement with The Mortgage Group as a director of the company up to 15 January 2003 undoubtedly raises an inquiry as to whether he had a continued involvement with the affairs of the company. Jeremy Allan denied that he did. According to Jeremy Allan they parted their ways. Whilst Jeremy Allan was in many ways an unsatisfactory witness, there was no evidence that Stefan Allan did have any such continued involvement. 51 Counsel for the plaintiffs did not submit that the knowledge or conduct of James Michalopoulos should be attributed to The Mortgage Group and via it to the lenders, and no such case was pleaded. Again, counsel was correct in adopting this position. Although Jeremy Allan appeared to have regarded an accredited introducer as an agent for The Mortgage Group to carry out part of the obligations of The Mortgage Group in assessing a loan application, and although he said that James Michalopoulos or his company, Distinctive Events, was the accredited introducer for the plaintiffs' loan, even if that led to James Michalopoulos' conduct and knowledge being attributed to The Mortgage Group, it would not lead to its being attributed to Interstar or the lenders because the subcontracting out of The Mortgage Group's functions was prohibited without the written consent of Interstar and no such consent was forthcoming. 52 Jeremy Allan deposed that the loan application form and the "Latinum Declaration of Financial Position" were complete when they were received at the office of The Mortgage Group in mid April 2003. (The Latinum Declaration of Financial position was the document that stated amongst other things that the plaintiffs' occupation was that of drycleaner, and that they were both self-employed having a net income of $100,000 each: see para [38] above.) I accept that evidence. It is consistent with the plaintiffs' evidence that Stefan Allan said that he would complete the form, that he should do so, and submit a completed form to The Mortgage Group. 53 Stefan Allan's wife, Dennise Allan, worked on a casual basis for The Mortgage Group. She prepared a memorandum addressed to Stefan Allan dated 15 April 2003 asking for a number of items which she said had been discussed with Jeremy Allan. These included a request for a provision of "Letter of Conduct" and "is [sic] Borrowers Self-employed, please provide full details of current employment of Borrowers". The following day Stefan Allan provided a memorandum to The Mortgage Group enclosing what was called a "letter of conduct" from The Property Group. In response to a request for details of the borrowers' employment, he said "Borrowers operate & manage a very successful cleaning (commercial) business". The letter of conduct from The Property Group stated "The above applicant [Mr and Mrs Michalopoulos] is in debt to our firm for $600,000. The transaction interest payments have been conducted in a very satisfactory matter [sic]. If you need any further assistance please do not hesitate to contact the undersigned." The document was signed by Stefan Allan. 54 Jeremy Allan took the documents at face value. He said that he had no indication that the information provided by the plaintiffs that they earned $100,000 per annum each was incorrect. He said that he was unaware that the plaintiffs had no loan through The Property Group that was to be refinanced. 55 Jeremy Allan accepted that The Mortgage Group had an obligation to Interstar to satisfy itself that the borrowers were unable to provide financial statements or taxation returns. Latinum loans were only intended for borrowers in that position (T388). The effect of his evidence was that he relied on the broker or "accredited introducer", that is, James Michalopoulos, to verify that. 56 Given his acceptance that this was a matter that needed to be checked, The Mortgage Group was in breach of its duties to Interstar in not carrying out the check itself. As James Michalopoulos or his company had not been approved by Interstar under clause 3.3 of the agreement, it was a breach by The Mortgage Group to delegate that task to James Michalopoulos or his company. However, that is of only indirect relevance to the plaintiffs' claim. 57 Interstar's Guidelines Manual provided that if a borrower were able to provide current financial information and taxation returns, Interstar would consider a request to convert the loan to a Standard Program loan resulting in a reduced interest rate for the borrower. Nonetheless, Jeremy Allan's failure to check that the plaintiffs were persons for whom the Latinum program was designed does not justify drawing an inference that he was aware that the Latinum loan was being applied for because that loan could be procured through false representations as to income. He simply did not carry out any checks. 58 The Interstar Guidelines Manual required The Mortgage Group physically to meet a borrower and satisfy itself beyond doubt as to the borrower's identity (Clause 5.1.1). Jeremy Allan knew of the borrower's identity because of his previous introduction to the plaintiffs on a social occasion. Jeremy Allan appeared to accept that the Interstar Guidelines Manual also required that The Mortgage Group verify the accuracy of the borrowers' names, addresses, telephone numbers and occupations (although the manual in fact required only the verification of such information concerning not the borrowers, but parties involved in introducing the borrower to the mortgage group (Exhibit GW1, p 56)). Jeremy Allan said that he did check the accuracy of the statement in the application of the plaintiffs' occupation by carrying out an Australian Business Number search. That was a search that showed the Michalopoulos Family Trust had an Australian Business Number. It did not indicate anything other than that the plaintiffs had a family trust. It did not establish or verify the fact that they were self-employed or conducted business as drycleaners. Jeremy Allan did not speak to James Michalopoulos about his parents' occupation. 59 Jeremy Allan had met Mr and Mrs Michalopoulos on a brief social occasion before the application was submitted. He did not interview either of them. He did not carry out any check to verify their stated income. However, the nature of the program was such that it would not be expected that such verification would be available, other than by the applicant's confirming orally what was inserted on the application form. 60 The reason Jeremy Allan gave for requesting full details of "current employment of Borrowers" was that he had a credit report dated 15 April 2003 which showed Mr Michalopoulos as having been employed from 1 September 1990 by "Telecom". This was contradictory to the information on the loan application form. Jeremy Allan asked Stefan Allan what Mr Michalopoulos did at Telecom and what he did as being self-employed. Stefan Allan responded by saying that Mr Michalopoulos used to work for Telecom, but did not work for Telecom anymore and was self-employed. Jeremy Allan made no further inquiry but relied upon Stefan Allan's statement to that effect, as recorded in Stefan Allan's memo of 16 April 2003. 61 The statement in the loan application that might be expected to have concerned Jeremy Allan was that the purpose of the loan was to refinance a $600,000 debt owed by the plaintiffs to The Property Group. The Property Group was a business in which Jeremy Allan had been involved up to about four months before he received the loan application. He knew that up to that time no loan of $600,000 had been made to the plaintiffs. The business then carried on had not involved the lending of money on mortgage. (T397). However, Jeremy Allan said (and I accept) that in the past Stefan Allan had been in the business of providing short-term loans and it would not be out of character for him to have changed the business of The Property Group. Jeremy Allan had had no information about the business after he had resigned in December 2002. There was a bank account that remained in the name of Jeremy Allan and Stefan Allen trading as The Property Group, but Jeremy Allan had no involvement with the account after his resignation. 62 At the time, Jeremy Allan distrusted his brother. He said that in April 2003 his brother had a practice of misleading him or not telling him the full story (T462). In cross-examination he was asked whether he did not think it worth checking the fact that a business of The Property Group that had been conducting "second tier real estate business" was now supposedly lending out money. His response was "No, because he wouldn't have told me the truth anyway. He would have just told me what he wanted to tell me." (T462). Jeremy Allan and Stefan Allan worked in close proximity to each other. Stefan Allan had an office in the offices occupied by The Mortgage Group. As noted above, Jeremy Allan employed Stefan Allan's wife on a temporary basis. 63 Jeremy Allan made no inquiry about the stated loan from The Property Group. One part of the loan application form stated that the property to be mortgaged was owned by the plaintiffs without a mortgage and had been so owned for two years. It would be inferred from that part of the form that the debt of $600,000 for which refinance was sought was not a debt for which there was security by way of mortgage over the house. Elsewhere the $600,000 debt to The Property Group was described as an existing mortgage liability and not as a personal loan. The plaintiffs' statement of assets and liabilities showed no assets which might explain the purpose of a $600,000 loan from The Property Group. On the other hand Jeremy Allan was not cross-examined on the issue of whether the plaintiffs' statement of assets cast doubt on their having assumed a liability within the previous four months of $600,000 to The Property Group. Nor was he cross-examined on the apparent inconsistency in that liability being described as an existing mortgage and not as a personal loan, when the loan application form stated that the property was owned, but not mortgaged. It might be that these were details he simply did not notice. 64 Whilst there are grounds for suspicion that Jeremy Allan knew that the stated purpose of the loan was false, and although I do not consider Jeremy Allan to be a witness of credit, there is not enough to justify a finding that Jeremy Allan knew that the purpose of the loan was falsely stated or was recklessly indifferent to the truth of the statement. He obtained written verification from his brother that the plaintiffs owed a debt of $600,000 to The Property Group and that interest payments on the loan had been made satisfactorily. 65 Jeremy Allan admitted that in April 2003 he knew that his brother Stefan was involved in property development (T478-479). It was squarely put to him that he knew that the purpose of the plaintiffs' loan was to raise money to go into that property development. He denied having that knowledge. There is no evidence that he had such knowledge. If that were a fact known to him, it is likely to have been discussed with James Michalopoulos. James Michalopoulos gave no evidence of any such discussion, although he gave evidence for his parents. 66 Dennise Allan signed a direction on 1 May 2003 on behalf of The Property Group directing payment of $496,000 to The Property Group and $96,000 to one "George Elias". In final submissions (in contrast to his opening submission) counsel for the plaintiffs did not submit that Dennise Allan's knowledge should be attributed to The Mortgage Group. Nor was that a case pleaded or particularised. 67 The plaintiffs and James Michalopoulos assumed that the proceeds of the loan had been paid to Stefan Allan. The payment was made to him or at his direction. 68 Jeremy Allan was aware that the plaintiffs spoke little English and that their son James spoke on their behalf. He gave no thought to their ability to read English (T457). 69 In short, Jeremy Allan knew that the loan was being arranged for the plaintiffs by Stefan Allan and their son James. He knew that Stefan Allan was involved in a property development and that James Michalopoulos was working out of the same office as Stefan. He knew that the plaintiffs had few English skills and were reliant on others to explain documents to them. He considered that Stefan was untrustworthy. He did not know that information on the loan application was false, but he made no worthwhile inquiry other than to Stefan to ascertain whether it was true. 70 The Mortgage Group did not breach the Loan Origination and Management Agreement in making such limited inquiries. Relevantly that agreement provided: " 5.1 The Originator agrees that, in the process of originating proposed Loans, the Originator will: (a) submit Applications to Interstar; (b) carry out credit checks of Applicants through an approved credit bureau; (c) provide Applicants with written correspondence setting out the proposed terms of a Loan; (d) arrange for the valuation of any Property which has been offered as security for a Loan; (e) do such other things as agreed from time to time between Interstar and the Originator; and (f) generally market and promote the loan products provided by Interstar. ... 6.1 The Originator will (and will ensure that all of the Originator's Representatives will) at all times and in all things fulfil its obligations under this Agreement with a high degree of professional skill, care and diligence and in accordance with good mortgage origination and management practice and so as to protect the interests of Interstar and the Trustee. 6.2 Without limiting the general obligations under clause 6.1, the Originator will (and will ensure that the Originator's Representatives will): ... (c) provide to Interstar all information that comes to the Originator's attention which may be relevant to Interstar's decision whether or not to approve an Application; ... (g) ensure that all requirements contained in the Manual are complied with by the Originator during the term of this Agreement as if the contents of the Manual were set out in full in this Agreement as terms binding on the Originator; (h) act honestly in its dealings with all parties and not engage in misleading, deceptive or unethical conduct. ..." 71 The Interstar Guidelines Manual required that a credit package be submitted to Interstar for each loan. The manual set out what documents were required to be included in the credit package. There was no general requirement that the originator check the information so included personally with the borrower. As adverted to above, clause 5.1.1 of the manual required the originator physically to meet the borrower, but only to satisfy itself as to the borrower's identity. The manual also waived this requirement if that were not possible and if the originator were satisfied that another person had satisfied himself or herself as to the borrower's identity, being a person on whose integrity the originator could rely. The originator was required to verify the names, addresses, telephone numbers and occupations of all parties involved in introducing the borrower, but not of the borrower itself. Where a property loan was to be refinanced, the originator was required to verify the existing loan through account statements for the previous 12 months to check that these involved no evidence of default interest or loan balances being drawn in excess of approved limits. The manual provided that Interstar might in some instances accept a letter from the current financier confirming the satisfactory conduct of the loan. It was that provision that Stefan Allan used in providing a letter from The Property Group stating that the loan had been conducted satisfactorily. Jeremy Allan said that in the case of private lenders, regular account statements were not provided and that such a letter confirming satisfactory conduct of the loan was sufficient. The acceptance of the application by Interstar shows that that evidence was correct. 72 Perpetual's cross-claim against The Mortgage Group did not include any claim that The Mortgage Group had breached a term of its Loan Origination and Management Agreement with Interstar. The basis of Perpetual's cross-claim against The Mortgage Group was that The Mortgage Group had itself represented that: (a) the plaintiffs were self-employed drycleaners who had been in business for ten years; (b) the plaintiffs' gross annual income was $100,000 each; (c) the purpose of the loan was to refinance a current first mortgage at an interest rate of ten per cent and that the refinance would save the plaintiffs $15,060 per annum in interest; (d) that the loan being refinanced was in an amount of $600,000 and was owed to The Property Group; and (e) that interest payments to The Property Group had been conducted in a very satisfactory manner. 73 Representations to this effect were made by The Mortgage Group. The Mortgage Group did not merely act as a conduit to pass on the loan application to Interstar. It did pass the loan application on to Interstar, but Jeremy Allan also prepared a loan proposal which he submitted to Interstar based on the documents with which he had been provided. He prepared a report of 16 April 2003 attaching the loan application which he summarised. He added as a general comment that: " The applicants have been self-employed Dry Cleaners for a period of 10 years. They currently wish to refinance their current first mortgage which is at an interest rate of 10%. The clients will be saving in interest with this refinance of $15,060 p/a. The applicants have a net asset position of $1,350,000. Borrowers have very stable employment, high net worth and comfortable loan servicing ability making this a sound proposal worthy of our support. " 74 These statements went well beyond merely passing on the loan application to Interstar so as to convey the representations in the loan application for whatever they were worth. They conveyed that The Mortgage Group had itself considered the statements in the loan application and considered the proposal to be worthy of support. However, Jeremy Allan's letter to Interstar of 16 April 2003 does not provide a basis for inferring that he was aware that the loan application contained false representations. Attribution of the knowledge and conduct of The Mortgage Group to Perpetual 75 The Mortgage Group acted as an "originator" of proposed loans. In that capacity it was authorised on behalf of Interstar to market and promote the loan products provided by Interstar. It was authorised to carry out credit checks of applicants through an approved credit bureau. It was required to provide to Interstar all information that came to its attention which might be relevant to Interstar's decision whether or not to approve an application. Once a loan was approved and drawn down The Mortgage Group was also authorised to continue to liaise with the borrower in relation to the loan, to answer any queries raised by the borrower, or to refer them to Interstar, and to generally manage and service such loans in accordance with the Guidelines Manual. 76 Clause 4.1 of the Loan Origination and Management Agreement provided that from time to time The Mortgage Group could submit an application for a loan to Interstar for Interstar's consideration. The Mortgage Group had no authority to approve a loan. (Compare Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41; (2006) 14 BPR 26,369 at [102].) However it was authorised to carry out inquiries in relation to prospective borrowers in accordance with Interstar's Guidelines Manual. Neither the fact that The Mortgage Group was paid by Interstar, nor the fact that The Mortgage Group introduced prospective borrowers to Interstar, is sufficient to make The Mortgage Group Interstar's agent (NMFM Property Pty Ltd v Citibank Limited (No 10) [2000] FCA 1558; (2000) 107 FCR 270 at [562]; Permanent Trustee Co Limited v O'Donnell [2009] NSWSC 902 at [340]). 77 The Mortgage Group did not act as a finance broker for the plaintiffs. That is, the plaintiffs did not appoint The Mortgage Group to act for them in submitting their loan application to Interstar. Rather, the plaintiffs, acting through their agent, James Michalopoulos or Stefan Allan, submitted their loan application to The Mortgage Group for it to consider and, if supported, to forward to Interstar. Nor did The Mortgage Group act as an independent contractor to submit loan applications to Interstar with a warranty that the loan applications complied with Interstar's guidelines. 78 The Mortgage Group was required by clause 6.2(c) of the Loan Origination and Management Agreement to provide to Interstar all information coming to its attention which might be relevant to Interstar's decision whether or not to approve an application. That could, and in many cases would be expected to, include information adverse to the interests of the borrower. That is not decisive of the question whether The Mortgage Group was Interstar's agent, but is indicative of the fact that The Mortgage Group was not acting for the plaintiffs. The loan was not a contract of utmost good faith, where such disclosure is required. As previously noted, The Mortgage Group agreed only to employ such persons as might be necessary for it to carry out its obligations under the Loan Origination and Management Agreement. Without Interstar's approval it could not delegate any of its functions to a third party. That is inconsistent with its being merely an independent contractor. 79 In my view, in carrying out its functions under the Loan Origination and Management Agreement, including carrying out checks in respect of the applicants and submitting loan applications to Interstar, The Mortgage Group was acting as Interstar's agent. The knowledge it acquired and its acts and omissions are to be attributed to Interstar. 80 There was no issue that Interstar acted for Perpetual in investing in mortgage loans. 81 The corporation alleged to have contravened ss 51AA, 51AB and 51AC of the Trade Practices Act is Perpetual. It is not alleged that any employee of Perpetual behaved unconscionably. Perpetual would probably have had no knowledge of the transaction. The effect of s 84 of the Trade Practices Act is that conduct engaged in by an agent of a corporation is taken to have been engaged in by the corporation itself. Section 84 provides: " 84 Conduct by directors, employees or agents (1) If, in: ... (b) a proceeding under this Part in respect of conduct engaged in by a body corporate, being conduct in relation to which ... Part IVA ... applies; it is necessary to establish the state of mind of the body corporate, it is sufficient to show that: (c) a director, employee or agent of the body corporate engaged in that conduct; and (d) the director, employee or agent was, in engaging in that conduct, acting within the scope of his or her actual or apparent authority; and (e) the director, employee or agent had that state of mind. (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. (3) If, in: ... (b) a proceeding under this Part in respect of conduct engaged in by a person other than a body corporate, being conduct in relation to which section ... Part IVA ... applies; it is necessary to establish the state of mind of the person, it is sufficient to show that: (c) an employee or agent of the person engaged in that conduct; and (d) the employee or agent was, in engaging in that conduct, acting within the scope of his or her actual or apparent authority; and (e) the employee or agent had that state of mind. (4) Conduct engaged in on behalf of a person other than a body corporate: (a) by an employee or agent of the person within the scope of the actual or apparent authority of the employee or agent; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of an employee or agent of the first mentioned person, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the first mentioned person. ... (5) A reference in this section to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person's reasons for the person's intention, opinion, belief or purpose. " 82 Pursuant to s 84(2), conduct engaged in by Jeremy Allan is deemed to have been engaged in also by The Mortgage Group. In my view, the deeming effect of subs 84(2) has a successive application. That is to say, conduct deemed to have been engaged in by The Mortgage Group because it was engaged in by Jeremy Allan is also deemed to have been engaged in by Interstar because it is deemed to have been engaged in by The Mortgage Group. Similarly, that conduct is also deemed to have been engaged in by Perpetual. In a similar way the knowledge or state of mind of a subagent can be attributed to the principal. Perpetual did not argue to the contrary. Therefore when considering the plaintiffs' claim that Perpetual engaged in unconscionable conduct, regard is to be had to the procedures established by Interstar, to the conduct of the officers of Interstar who reviewed the loan application, and to the conduct and knowledge of Jeremy Allan on behalf of The Mortgage Group. 83 In light of my findings that Jeremy Allan did not know that the statements in the loan application were false, and in the absence of any claim that the knowledge or conduct of Stefan Allan, Dennise Allan, or James Michalopoulos were to be attributed to The Mortgage Group and to Interstar, no question arises about the attribution of knowledge of an agent acting in fraud of his principal (Re Hampshire Land Co [1896] 2 Ch 743; Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 at [473]-[476]; and compare Nathan v Dollars & Sense Finance Ltd [2007] NZCA 177; [2007] 2 NZLR 747 at [99]-[108], affirmed on appeal Dollars & Sense Finance Ltd v Nathan [2008] 2 NZLR 557 but not deciding this point; Permanent Trustee Co Limited v O'Donnell at [368]-[373] applying Beach Petroleum NL v Johnson (1993) 115 ALR 411 at [574]). Alleged contraventions of sections 51AA, 51AB and 51AC of the Trade Practices Act 84 In 2003, ss 51AA, 51AB and 51AC provided as follows: " 51AA Unconscionable conduct within the meaning of the unwritten law of the States and Territories (1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by section 51AB or 51AC. 51AB Unconscionable conduct (1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person (in this subsection referred to as the consumer ), the court may have regard to: (a) the relative strengths of the bargaining positions of the corporation and the consumer; (b) whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation. (3) A corporation shall not be taken for the purposes of this section to engage in unconscionable conduct in connection with the supply or possible supply of goods or services to a person by reason only that the corporation institutes legal proceedings in relation to that supply or possible supply or refers a dispute or claim in relation to that supply or possible supply to arbitration. (4) For the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person: (a) the court shall not have regard to any circumstances that were not reasonably forseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (5) A reference in this section to goods or services is a reference to goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. (6) A reference in this section to the supply or possible supply of goods does not include a reference to the supply or possible supply of goods for the purpose of re supply or for the purpose of using them up or transforming them in trade or commerce. (7) Section 51A applies for the purposes of this section in the same way as it applies for the purposes of Division 1 of Part V. 51AC Unconscionable conduct in business transactions (1) A corporation must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. ... (3) Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a corporation or a person (the supplier ) has contravened subsection (1) or (2) in connection with the supply or possible supply of goods or services to a person or a corporation (the business consumer ), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the business consumer; and (b) whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the business consumer: (i) any intended conduct of the supplier that might affect the interests of the business consumer; and (ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer); and (j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer; and (ja) whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the business consumer for the supply of the goods or services; and (k) the extent to which the supplier and the business consumer acted in good faith. (4) Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a corporation or a person (the acquirer ) has contravened subsection (1) or (2) in connection with the acquisition or possible acquisition of goods or services from a person or corporation (the small business supplier ), the court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the small business supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the small business supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the small business supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the small business supplier or a person acting on behalf of the small business supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and (e) the amount for which, and the circumstances in which, the small business supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and (f) the extent to which the acquirer's conduct towards the small business supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like small business suppliers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the small business supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the small business supplier: (i) any intended conduct of the acquirer that might affect the interests of the small business supplier; and (ii) any risks to the small business supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the small business supplier); and (j) the extent to which the acquirer was willing to negotiate the terms and conditions of any contract for the acquisition of the goods and services with the small business supplier; and (ja) whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the small business supplier for the acquisition of the goods or services; and (k) the extent to which the acquirer and the small business supplier acted in good faith. (5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with: (a) the supply or possible supply of goods or services to another person; or (b) the acquisition or possible acquisition of goods or services from another person; by reason only that the first mentioned person institutes legal proceedings in relation to that supply, possible supply, acquisition or possible acquisition or refers to arbitration a dispute or claim in relation to that supply, possible supply, acquisition or possible acquisition. (6) For the purpose of determining whether a corporation has contravened subsection (1) or whether a person has contravened subsection (2): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement. (7) A reference in this section to the supply or possible supply of goods or services is a reference to the supply or possible supply of goods or services to a person whose acquisition or possible acquisition of the goods or services is or would be for the purpose of trade or commerce. (8) A reference in this section to the acquisition or possible acquisition of goods or services is a reference to the acquisition or possible acquisition of goods or services by a person whose acquisition or possible acquisition of the goods or services is or would be for the purpose of trade or commerce. (9) A reference in this section to the supply or possible supply of goods or services does not include a reference to the supply or possible supply of goods or services at a price in excess of $3,000,000, or such higher amount as is prescribed. (10) A reference in this section to the acquisition or possible acquisition of goods or services does not include a reference to the acquisition or possible acquisition of goods or services at a price in excess of $3,000,000, or such higher amount as is prescribed. (11) For the purposes of subsections (9) and (10): (a) subject to paragraphs (b), (c), (d) and (e), the price for: (i) the supply or possible supply of goods or services to a person; or (ii) the acquisition or possible acquisition of goods or services by a person; is taken to be the amount paid or payable by the person for the goods or services; and (b) paragraph 4B(2)(c) applies as if references in that paragraph to the purchase of goods or services by a person were references to: (i) the supply of goods or services to a person pursuant to a purchase; or (ii) the acquisition of goods or services by a person by way of purchase; as the case requires; and (c) paragraph 4B(2)(d) applies as if: (i) the reference in that paragraph to a person acquiring goods or services otherwise than by way of purchase included a reference to a person being supplied with goods or services otherwise than pursuant to a purchase; and (ii) a reference in that paragraph to acquisition included a reference to supply; and (d) paragraph 4B(2)(e) applies as if references in that paragraph to the acquisition of goods or services by a person, or to the acquisition of services by a person, included references to the supply of goods or services to a person, or the supply of services, to a person, as the case may be; and (e) the price for the supply or possible supply, or the acquisition or possible acquisition, of services comprising or including a loan or loan facility is taken to include the capital value of the loan or loan facility. (12) Section 51A applies for the purposes of this section in the same way as it applies for the purposes of Division 1 of Part V. (13) Expressions used in this section that are defined for the purpose of Part IVB have the same meaning in this section as they do in Part IVB. (14) In this section, listed public company has the same meaning as it has in the Income Tax Assessment Act 1997. " 85 In final submissions the parties did not focus upon the question of which if any of ss 51AA, 51AB or 51AC of the Trade Practices Act applied. Section 51AAB provides that neither s 51AA nor s 51AB applies to conduct engaged in in relation to financial services or the supply or possible supply of services that are financial services. Sections 51AA, 51AB and 51AC of the Trade Practices Act are mirrored by ss 12CA, 12CB and 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"). The plaintiffs did not plead a contravention of ss 12CA, 12CB or 12CC of the ASIC Act. Perpetual neither pleaded nor submitted that the plaintiffs could not rely upon ss 51AA, 51AB or 51AC of the Trade Practices Act because the impugned conduct was engaged in in relation to the supply of financial services. 86 Prima facie, Perpetual's loan was a provision of a financial service, although that conclusion is only arrived at through a labyrinth contained in Division 2 of Part 2 of the ASIC Act and a construction of the definition of "credit facility" in reg 2B(3) of the Australian Securities and Investments Commission Regulations 2001 that may be debatable (in particular in relation to whether the particular forms of "credit" provided for in reg 2B(3)(b) stand independently of the definition in para 2B(3)(a)). There is no relevant difference between the substantive provisions of ss 51AA, 51AB and 51AC of the Trade Practices Act and their equivalents in the ASIC Act, nor in the remedies provided. If Perpetual had pleaded that the impugned conduct was engaged in in relation to the supply of financial services, the plaintiffs would have been entitled to rely upon the equivalent provisions of the ASIC Act and I would have given leave to amend the statement of claim to permit them to do so. I will proceed on the basis that it is the Trade Practices Act that applies, although my prima facie view is that that is not the case. 87 Section 51AB of the Trade Practices Act does not apply because the services supplied by Perpetual, namely the loan, were not of a kind ordinarily acquired for personal, domestic or household use or consumption (s 51AB(5); Begbie v State Bank of New South Wales Ltd (1994) ATPR 41-288). 88 Section 51AA of the Trade Practices Act does not apply to conduct that is prohibited by s 51AC. Section 51AA incorporates equitable principles of unconscionable conduct for a contravention of which statutory remedies are provided. Whilst s 51AA is inapplicable if the conduct is prohibited by s 51AC, the prohibition in s 51AC(1) and (2) on a corporation or person engaging in conduct that is unconscionable necessarily directs attention to the same concepts, albeit that the section has a wider operation than s 51AA because of the matters in s 51AC(3). That is to say, a corporation or person may engage in conduct that is unconscionable even if that conduct does not involve the taking advantage of a special disability under which the opposite party labours. If, however, a party does labour under such a special disability and unconscientious advantage is taken of it, then s 51AC(1) or (2) would apply if the transaction is one within the ambit of s 51AC(7), (8), (9), or (10). 89 The plaintiffs' purpose in acquiring the loan was for the purpose of trade or commerce so that s 51AC is attracted (s 51AC(7)). That is so because the plaintiffs' purpose in acquiring the loan was in order to make an investment in the property development being carried on under the management of Stefan Allan. 90 To attract the equitable principles for relief against unconscionable dealing the plaintiffs must establish that they entered into the transaction with Perpetual under a special disability or disadvantage of which Perpetual through its agent or subagent knew, or ought to have known, and that Perpetual took an unfair or unconscientious advantage of the plaintiffs' position of special disadvantage (Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at 462, 475). 91 I accept the plaintiffs' submission that they were in a position of special disadvantage. They were persons of no great education. They were ill-equipped to understand the risks of the property development in which they were induced to participate. They were reliant on their son to advise them about that transaction. Their son was willing to risk his parents' assets for his profit, although he shared no part of the risk. The plaintiffs were easily seduced by Stefan Allan's blandishments. They did not have the education to make an informed judgment about the proposed investment and the risks associated with the borrowing. They knew nothing of Stefan Allan, except what he told them about himself and what their son may have said about him. Yet they placed blind faith in him. In many ways their position was analogous to that of the plaintiffs in Commercial Bank of Australia Limited v Amadio. 92 I also accept that Perpetual, through its subagent The Mortgage Group, ought to have known of the plaintiffs' position of special disadvantage. Had Perpetual, through its subagent The Mortgage Group, spoken to the borrowers to confirm the details of the loan application, it would have learned that the money sought to be raised was for a speculative investment in a property development about the details of which the plaintiffs had no idea, that the plaintiffs did not have the capacity to repay the loan from their own income, and that the plaintiffs' agent had falsified the loan application. 93 However, Perpetual did not take an unconscientious advantage of the plaintiffs' position of special disadvantage. The plaintiffs' position of special disadvantage was in relation to their investment with Stefan Allan. Perpetual and its agent and subagent knew nothing about that. Perpetual made a loan at a commercial rate of interest containing no unusual or disadvantageous terms to the borrower. Its position was quite unlike that of the bank in Commercial Bank of Australia Limited v Amadio which sought to improve its security position by taking a mortgage from the plaintiffs to secure an existing overdraft of the plaintiffs' son. 94 Rather than Perpetual's taking advantage of the plaintiffs' position of special disadvantage, it was the plaintiffs who took advantage of Perpetual's failure to investigate the proposed borrowing by misleading Interstar about their financial position and the purpose of the loan. 95 No undue influence or pressure was applied by Perpetual or its agent or subagent. Nor were any unfair tactics used by Perpetual or its agent or subagent against the plaintiffs. Perpetual and its agent and subagent acted in good faith, although the plaintiffs did not. 96 Counsel for the plaintiffs submitted that Perpetual acted unconscionably because it engaged in what has been called "pure asset lending", that is, lending without regard to the ability of the borrower to repay the loan, knowing that the security will be sufficient to recover the loan on default. Such conduct may lead to a court's finding that a contract of loan and mortgage is unjust in the circumstances in which it was entered into, entitling the borrower to relief under the Contracts Review Act (Elkofairi v Permanent Trustee Co Limited [2002] NSWCA 413; (2003) 11 BPR 20,841 at [79]; Perpetual Trustee Co Limited v Khoshaba at [82], [128]; Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 at [70]). 97 There is an obvious similarity between the matters listed in s 51AC(3) to which the court may have regard for the purpose of determining whether a supplier has contravened s 51AC(1) or (2) and the matters to be considered by the court under s 9 of the Contracts Review Act where a court is asked to find that a contract or a provision of a contract was unjust in the circumstances relating to the contract at the time it was made. (See para [127] below.) However the inquiries are not the same. A contract may be unjust in the circumstances in which it is made, notwithstanding that the parties seeking to enforce the contract did not behave unconscionably when the contract was entered into (Perpetual Trustee Co Limited v Khoshaba at [115]; see as an illustration Andrews v Racken Pty Ltd [2007] NSWSC 1010 at [220]-[231]). As Spigelman CJ said in Attorney General (NSW) v World Best Holdings Limited [2005] NSWCA 261; (2005) 63 NSWLR 557 at [119]-[121], albeit in a different context, unconscionability is a concept requiring a high level of moral obloquy going beyond concepts of what is unfair or unjust. 98 A conclusion that Perpetual engaged in mere asset lending would not necessarily lead to a conclusion that it engaged in unconscionable conduct. Thus, in Perpetual Trustee Co Limited v Khoshaba, Spigelman CJ (with whom Handley JA agreed) regarded the conflicting considerations as to whether the contract in that case was unfair or unjust as being finely balanced. It could not be inferred from the decision in Perpetual Trustee Co Limited v Khoshaba that because in that case the lender engaged in mere asset lending which rendered the contract of loan unjust, it would also have been held that the lender acted unconscionably. 99 In the present case, I do not accept that Interstar acted without regard to whether the borrowers could service the loan. Because Interstar did not seek to verify the information provided about the borrowers' ability to service the loan, it undoubtedly relied on its security in the event of default. In some respects the case has similarities with Perpetual Trustee Co Limited v Khoshaba, but there are important differences. In that case, as in this, the loan application submitted to the lender falsely stated the borrowers' income. In Perpetual Trustee Co Limited v Khoshaba the amount of the loan was $120,000. The loan application stated that the borrower's income was $43,000 per annum. This was false, but (unlike this case) the borrowers had no responsibility for the false statements. According to Basten JA (at [124]) the loan repayments were approximately $10,000 per year and the stated income fell within the relevant guidelines for the lender as to acceptable income to service the loan. Perhaps critically in Perpetual Trustee Co Limited v Khoshaba, the loan application form left the purpose of the loan blank. This fact indicated to Spigelman CJ that the lender was content to lend on the value of the security (at [82]). His Honour said: " [83] On the information actually available to the Appellant, a husband and wife — one with a $43,000 per annum income and the other a pensioner — borrowed $120,000 for, as far as the Appellant cared to know, immediate expenditure. Enforcing a security against the personal residence of such borrowers should not be treated as if it were the first resort. That is what, on paper, the Appellant can be described as having done. " 100 The implicit assumption in para [83] quoted above is that the stated income would be insufficient to service the loan. In Kowalczuk v Accom Finance Pty Ltd [208] NSWCA 343; (2008) 252 ALR 55, Campbell JA (with whom Hodgson and McColl JJA agreed) (at [96]) said that the basis for the decision in Perpetual Trustee Co Limited v Khoshaba was that the stated income of the applicants of $43,000 per annum, coupled with the absence of information about the purpose of the loan, indicated that the transaction involved "pure asset lending". It is hard to see how that conclusion could be drawn unless it were the case that the stated income was considered to be insufficient to service the loan. 101 In Perpetual Trustee Co Limited v Khoshaba, Spigelman CJ added: " [84] This conclusion is reinforced by the Appellant's concomitant failure to verify or follow up, in the way identified by Rolfe DCJ, other details in the loan application. ... However, the other failures, such as not verifying employment and income and not ensuring documents were properly executed, reinforce the conclusion that the Appellant was prepared to act on the basis of adequate security alone. [85] Where the security is the family home of a low income earner and a pensioner, this posture on the part of a lender is entitled to significant weight against the lender in the determination of unjustness. " 102 His Honour concluded that the lender's failure to make any inquiries about the purpose of the loan suggested that it was content to proceed on the basis of enforcing the security (at [92]). 103 Basten JA held: " [124] In the present case, the trial judge found that the agent of the lender, Mr Tadros, had not made any inquiries as to the purpose of the loan or the income of the borrowers. The loan application stated, falsely, that the husband was in employment and had an income for $43,000 per year. The loan repayments of approximately $10,000 per year fell, broadly speaking, within the relevant guideline. However, in the absence of any attempt to verify the accuracy of the figure, the lender should be taken not to have relied upon the ability of the borrowers to make instalment repayments on time, in accordance with the terms of the contract. [125] Where the loan was intended for investment purposes, rather than expenditure on consumable items, it was at least arguable that the loan would be self-funding. Again, however, the failure of the lender to inquire as to the purpose of the loan indicates that no reliance was placed on that possibility. " 104 Whilst the Court of Appeal's decision in Perpetual Trustee Co Limited v Khoshaba that a contract may be unjust where a lender engages in "mere asset lending" lays down a principle of law, the finding that the lender in Perpetual Trustee Co Limited v Khoshaba did engage in "mere asset lending" is a finding of fact that involves no binding precedent, although the process of reasoning on the question of fact is to be given due respect (Conkey & Sons Limited v Miller (1977) 51 ALJR 583; (1977) 16 ALR 479). Normally, where a representation is material to a decision, the failure to verify the accuracy of the representation by an independent check would support a claim by the representee that it relied on the representation, rather than the contrary. 105 In the present case the loan application stated the purpose of the loan as being to discharge an existing debt which attracted a higher rate of interest. The disclosed income, if correct, would have been sufficient to service the loan. In the absence of knowledge by the lender or its agent or subagent that the stated purpose of the loan and the stated income of the borrowers was false, or reckless indifference to whether the statements were true, I do not conclude that the money was lent without regard to the ability of the borrowers to repay the instalments under the contract of loan. In this case, as in Perpetual Trustee Co Limited v Khoshaba, there was no attempt to verify the stated income of the borrowers. "Low doc" loans were offered with a higher interest rate on the basis that the borrowers did not have documents available to verify their income. There was a real risk to the lender that the borrowers may have falsely stated their income. The lender charged a higher interest rate against that risk. 106 The fact that no inquiry was made to verify the borrowers' income and Interstar's Guidelines Manual did not require any such attempted verification does not lead to the conclusion that the lender advanced the loan being indifferent to the borrowers' capacity to repay. The absence of verification and any requirement to seek verification shows that the lender was relying heavily on its security. But it is not unjust, let alone unconscionable, that a lender should rely on its security, as protection against the consequences of false information. 107 The fact that declarations were required of the borrowers' income shows that the lender was not indifferent to the borrowers' ability to service the loan. The fact that a different conclusion was reached on the facts in Perpetual Trustee Co Limited v Khoshaba is neither here nor there. 108 For these reasons I do not consider that Perpetual contravened s 51AC. For the same reasons it did not contravene s 51AA. 109 Counsel for Perpetual also submitted that the plaintiffs' claim for damages under s 82 of the Trade Practices Act for breach of ss 51AA, 51AB or 51AC was barred by s 82(2) because it was introduced by an amendment to the plaintiffs' statement of claim on 18` February 2010, more than six years after the loan with Perpetual was taken out (in May 2003) and the alleged loss or damage was said to have been suffered. Counsel further submitted that s 65(3) of the Civil Procedure Act 2005 (NSW) does not empower the court to extend the time limitation. In support of this submission, counsel referred to Vink v Schering Pty Ltd (1991) ATPR 41-064 (at 52-008-52-009). A different approach was taken in PSL Industries Ltd v Simplot Australia Pty Ltd [2003] VSCA 7. In light of my findings that the plaintiffs' claim fails on its merits, it is not necessary to determine this issue. 110 The plaintiffs' claim against Perpetual should be dismissed. Claim against Permanent 111 As noted at para [6] above, the plaintiffs' loan with Perpetual went into default in about February 2005 after Stefan Allan stopped making payments. In March 2005 James Michalopoulos told Jeremy Allan that the loan was defaulting "left, right and centre". On 16 March 2005 Mr and Mrs Michalopoulos sent a facsimile addressed to Interstar, care of The Mortgage Group, advising that they would pay all arrears in full by 30 March 2005. The Mortgage Group forwarded that facsimile to Interstar. 112 As noted at paras [6] and [7], after Perpetual obtained judgment for possession of the Birrell Street property, the outstanding arrears on the loan were paid by the plaintiffs who then kept up the loan payments. The plaintiffs accepted the advice of Stefan Allan in January 2006 to refinance and borrow additional moneys to cover two years' interest payments until the units in the development were sold. Stefan Allan told the plaintiffs that construction of the property was finished, but he was having trouble selling the units. He said that the market had dipped and they would have to wait maybe six months before all the units were sold. He said that three units had been sold and that the lender who financed the construction would be paid out first from the sale of the units. He advised the plaintiffs that if they borrowed from a new lender, they could borrow an extra $150,000 to cover interest for at least two years. He assured the plaintiffs that: " Don't worry everything will be fine this time. You will have the extra money, you can control everything. Jeremy and I will just help you to get the loan and then you can set it up so the extra money is in your account and the payments come out on time. Everything should come to a close this year and then it will be all over. " 113 The plaintiffs decided that they should refinance rather than take legal proceedings against Perpetual and Stefan Allan, as they had been advised to do by their solicitor. 114 On 31 January 2006 Stefan Allan again attended at the plaintiffs' house and brought with him various documents which the plaintiffs signed in his presence. It is clear from the documents submitted to The Mortgage Group, and by The Mortgage Group to AFIG, that some of the documents were copies of the loan application form completed for the first loan, which someone (presumably Stefan Allan) had amended by whiting out parts of the original document and making amendments by hand and re-photocopying. 115 Stefan Allan told the plaintiffs that he would be using some of the earlier material from the older application. He said that he had a couple of extra documents for the plaintiffs to sign. One of the documents signed by Mr Michalopoulos on 31 January 2006 was a declaration of income. Paragraph 1 of the declaration required him to state his occupation. Paragraph 6 required him to state his monthly income. Paragraph 7 (immediately above his signature) stated "All of the amounts shown above are a true and accurate representation of my financial position." As the document was ultimately filled in, it stated that Mr Michalopoulos was a cleaner by occupation and had a monthly income of $16,667. Mr Michalopoulos said that the form was blank when he signed it. I accept that evidence. Mr Michalopoulos left it to Stefan Allan to complete the form. He knew that he could not afford the repayments on a $750,000 loan with his income. He had just been retrenched from his employment. He accepted in cross-examination that he knew that no lender would lend him the money unless he could afford to make the monthly repayments. In my view, Mr Michalopoulos was aware that Stefan Allan would have to complete the declaration by inserting a false statement of his income if the loan were to be obtained. 116 When Jeremy Allan received the loan application in about February 2006 for a loan of $750,000, he did not take out the 2003 file. The document submitted included a copy of a three-page application form which must have been photocopied, amended by hand using Liquid Paper or similar material, and re-photocopied. 117 It is unnecessary to detail each of the changes to the signed 2003 loan application made in this fashion. A significant change was to the second page of the form. Whereas, in the 2003 form both Mr and Mrs Michalopoulos were described as having an occupation of drycleaner and being self-employed for ten years with each having an annual gross income of $100,000, on the form submitted in 2006, Mrs Michalopoulos' occupation was given as "home duties". Mr Michalopoulos was said to be self-employed and also employed by the Michalopoulos Family Trust, and had been so employed for 30 years. Mrs Michalopoulos' income was shown as "$ ,000". Mr Michalopoulos' gross income was said to be $200,000. There is a clear use of white out on this part of the form. 118 The third page of the form was the statement of assets and liabilities referred to at para [40]. It had been signed by the plaintiffs on 11 April 2003. This page was not re-signed by the plaintiffs. The original dates of 11 April 2003 appending their signatures were whited out and the date of 31 January 2006 was inserted. The statement of assets and liabilities was amended by substituting the figure of $1,300,000 for the value of the house and making a corresponding amendment to the total value of assets. The statement of liabilities was also amended by whiting out the words "Property Group", the value of the loan of $600,000 and monthly payments of $5,000. In their place was added the reference to Interstar as the existing mortgagee for a debt of $635,000 and monthly payments of $4,200. 119 Another page copied from the 2003 loan application stated the purpose of the proposed loan. That page had been signed by Mr and Mrs Michalopoulos on 11 April 2003. It was not re-signed. The date 11 April 2003 was whited out and a date of 31 January 2006 was inserted in its place. The amount and purpose of the proposed loan was amended, again by whiting out relevant parts, to provide that $635,000 was to be used to refinance the existing loan and $115,000 was to finance expenditure of a personal, domestic or household nature. 120 I do not conclude that the plaintiffs were aware of how the purpose of the proposed loan was described in the document submitted to The Mortgage Group in 2006. Nonetheless the plaintiffs were aware that false information had been provided for the first loan. They were aware that information provided for the first loan was being used in support of the application for the second loan. They were aware that such a loan would not be approved unless their stated income would be sufficient to meet loan repayments. They were aware that their true income would not be sufficient to meet loan repayments. In signing the declaration of income in blank, Mr Michalopoulos was aware that it would be completed falsely by Stefan Allan. 121 Under the Correspondent Deed between AMS, AFIG and The Mortgage Group, The Mortgage Group had the role of, amongst other things, sourcing and interviewing prospective borrowers, and processing and assessing each loan application (clause 4). It was required by AFIG's Operations Manual to evaluate the creditworthiness of the borrower in conjunction with the guidelines outlined in the manual. The Operations Manual provided that a "Correspondent", that is The Mortgage Group, must not submit a loan application to AFIG Wholesale for approval unless it were completely satisfied, having made all reasonable inquiries of the borrower, that the borrower would be able to meet its obligations under the loan contract without substantial hardship. However, in the case of "fast doc" loans, verification of the loan application could be provided by an "income/affordability declaration in lieu of income verification" (clauses 4.5 and 4.6 of the Operations Manual). 122 On 9 March 2006 Jeremy Allan submitted to AFIG Wholesale a "Mortgage Purchase Application" for the plaintiffs. The covering letter was clearly in a required standard form. Jeremy Allan stated: " Pursuant to the Correspondent Deed dated 6 th June, 2005 between The Mortgage Group (NSW) Pty Ltd and Australian Mortgage Securities Pty Ltd and AFIG Wholesale Pty Ltd, the Applicant hereby requests AFIG Wholesale to accept the purchase of the mortgage loan outlined in the attached Schedule 1 on the Settlement Date. Any capitalised term used in this Mortgage Purchase Application and not otherwise defined in this Application has the same meaning as in the Correspondent Deed. We hereby certify in respect of the mortgage loan outlined in Schedule 1 that as at the date of this Application: 1. The information contained in this Mortgage Purchase Application and all attachments is correct. 2. Each Mortgage to be purchased complies with the criteria set out in the Operations Manual (as amended from time to time) except for registration, and upon registration, the mortgage loan will meet all criteria in the Operations Manual. 3. We are not aware, nor been able to ascertain by reasonable enquiry, of any reason or circumstance under which the Borrower might be unable to pay in accordance with the terms set out in the loan contract or not without substantial hardship. ... " 123 Included with the application was a "Mortgage Loan Servicing Calculator" prepared by Jeremy Allan showing that with a gross income of $200,000, the plaintiffs had total net income of $119,450 after tax which was sufficient to cover loan repayments. AFIG ultimately approved the loan application. Although the AFIG employee who considered the application was not called, it is clear from the notations on AFIG's copy of the loan application that each of the relevant statements on the loan application was considered and approved by AFIG, including the statements of income. 124 Notwithstanding the statements by Jeremy Allan in his letter of 9 March 2006 that he had made reasonable inquiry as to whether the borrowers might be unable to pay without substantial hardship, and his certification that the information in the application was correct, he made no inquiry of the borrowers as to their ability to make loan repayments. He merely packaged the information contained on the loan application form in the summary of the application he provided to AFIG. 125 The form in which the loan application was submitted to The Mortgage Group ought to have raised questions as to the authenticity of some of the documents. The original documents as supplied to The Mortgage Group were not tendered. It was not possible to say what had happened to the originals. They were not sent to AFIG on 9 March 2006 because the loan application was sent by facsimile. Jeremy Allan denied still having the originals. There was a possibility that the originals were obtained during the course of an audit. Despite the absence of original documents, it can be inferred that the documents provided to The Mortgage Group consisted partly of original or copy documents signed by the plaintiffs and partly of photocopied documents of the amended 2003 application. A comparison between the 2003 loan application and the 2006 application would have shown that parts of the 2006 application had not been signed, but that information on the document as originally signed in 2003 had been changed. However, Jeremy Allan did not make any such comparison. Even had he done so, it would not in itself have indicated that the information in the application was false. 126 I do not conclude that Jeremy Allan knew that the statement of income in the 2006 loan application was false, or that he knew that part of the stated purpose of the loan was false. He made no inquiry to satisfy himself that the information was true. 127 Section 9 of the Contracts Review Act provides: " 9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. " 128 Leaving aside the payment of $100,000 to Australian Secured Fund, the Permanent loan and mortgage were not unjust contracts, or at least were not unjust to the plaintiffs. 129 It is not suggested that any of the commercial terms of the Permanent loan and mortgage are unfair. That is to say, the loan is not for excessive interest and there are no unreasonable terms. Inequality of bargaining power and the ability to negotiate terms are not relevant to the assessment of whether the Permanent loan and mortgage are unjust. The most that can be said is that Permanent, through The Mortgage Group, took no steps to satisfy itself that the plaintiffs would be able to repay the loan and took no steps to satisfy themselves that the stated purpose of the loan was wholly correct, but relied on the document submitted. I conclude that AFIG relied upon Mr Michalopoulos' declaration as to his income. Although the declaration was not filled in when he signed it, he authorised Stefan Allan to insert whatever details Stefan Allan chose, knowing that a correct statement of income would be likely to lead to a rejection of the application. Quite apart from that knowledge, there is no reason that the plaintiffs should not be bound to the consequences of allowing Stefan Allan to fill out the documentation for them. Permanent did not engage in "mere asset lending". It relied upon the stated declaration of income. 130 But even if Permanent had advanced the loan without regard to the ability of the borrowers to service the loan in reliance on its security, I would not consider the loan to be unjust in the circumstances it was made. The plaintiffs obtained the very loan they wanted. They had legal advice on whether they should challenge the Perpetual loan, but elected to refinance. Apart from the sum of $100,000 paid to Australian Secured Fund, all the moneys raised after expenses was paid to the plaintiffs or paid to discharge their liability to Perpetual. 131 The plaintiffs knew that they could not service the loan, but were relying upon Stefan Allan ultimately to make good on his promise of a return on the property investment. Neither Permanent, nor AFIG, nor The Mortgage Group participated in that investment decision. The plaintiffs knew that the consequence of defaulting on the loan would be that Permanent could exercise its power of sale over their house. This had been brought home to them starkly by the judgment for possession obtained by Perpetual. The plaintiffs wished to stave off the threat of Perpetual's exercising its power of sale when the plaintiffs became unable to continue to service the Perpetual loan. They did so, well aware of the risk that Stefan Allan would not make good on his promises, just as he had failed to honour his promises in the past. It would be unjust if the consequences of the plaintiffs' mis-judgment had to be borne by the lender. That is particularly so given that the plaintiffs misled AFIG in the loan application documents they allowed Stefan Allan to submit on their behalf. Relationship between AFIG and The Mortgage Group 132 For the purpose of determining whether the contracts of loan and mortgage with Permanent were unjust in the circumstances at the time they were made, it is not necessary to decide whether, in performing its obligations under the Correspondent Deed, The Mortgage Group was acting as agent for AFIG. The Correspondent Deed purported to exclude a relationship of agency. On the present issue, no question arises of Permanent's being liable for the conduct of The Mortgage Group. In deciding whether the contracts were unjust, regard is to be had to the fact that AFIG delegated to The Mortgage Group the task of verifying the loan application in accordance with its Operations Manual. To the extent The Mortgage Group's knowledge and conduct is relevant to an assessment as to whether the contracts were unjust, regard can be had to those matters as part of "the circumstances of the case" whether it was acting as AFIG's agent or as an independent contractor. However, the issue, although not decisive, is relevant to a later issue of whether The Mortgage Group was the plaintiffs' agent. Although a person may be agent for both lender and borrower, such a relationship that puts the intermediary in a position of conflict will not readily be inferred. 133 In South Sydney District Rugby League Football Club Limited v News Limited [2000] FCA 1541; (2000) 177 ALR 611, Finn J said (at [136]-137]): " [136] 5. Though there is no uniformly agreed definition of agency: see the discussion in Fisher, Agency Law , (2000), 8-11; the two whose authoritative character has resulted in their wide citation are those of the Restatement, Second, Agency, §1 and of Bowstead and Reynolds, above, 1-001 (the latter being based upon the Restatement provision). The Restatement's definition is that: '§1 Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.' I would note in passing that the definition proposed in the Restatement, Third, Agency, Tentative Draft No 1, §1.01 proposes no material departure from the above. Bowstead and Reynolds' definition is that: 'Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts.' The necessary consents apart, the required characteristics of the relation are that (a) one party acts on the other's behalf but (b) subject to that other's control or direction. [137] 6. The second of the above characteristics (control or direction) does not appear to figure prominently as a decisive indicator of agency in common law case law save in two settings. The first is where it is contended that a company is an agent of its parent company, shareholders, or of particular officers because of the control it or they exercise over it. ... The second setting in which resort has been had to the control characteristic is where a party that is expressed to stand in the relation of independent contractor to another is claimed as well to be the agent of that other. The two relationships are not mutually exclusive: see CFTO-TV Ltd v Mr Submarine Ltd (1994) 108 DLR (4th) 517; affd (1997) 151 DLR (4th) 382; Lower Hutt City v Attorney-General [1965] 2 NZLR 65 at 71; Restatement, Second, Agency, §14N. Though ' [c]ontrol by itself is insufficient to establish agency': Restatement, Third, Agency, Tentative Draft No 1, at 49 - the ' acting on behalf of' or ' representative' characteristic must be able to be discerned in the factual relation of the parties: Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 48-51 - where that characteristic can properly be inferred in circumstances in which the alleged principal exercises, or is entitled to exercise, a significant degree of control over the contractor's performance of its services (and in particular over contracts entered into), the contractor is apt in consequence to be characterised as an agent: see eg CFTO-TV Ltd v Mr Submarine Ltd, above; Northern v McGraw-Edison Co 542 F 2d 1336 (1976); Condus v Howard Savings Bank 986 F Supp 914 (1997); 2A Corpus Juris Secundum, 'Agency' , §12; see also Bowstead and Reynolds, above, 1-028. ... " 134 Clause 3.1 of the Correspondent Deed provides: " 3.1 Independent Contractor Except for the express delegation to the Correspondent of the exercise of the Powers contained in this Deed, the Correspondent agrees that in performing its obligations under this Deed: (a) it is an independent contractor and is not the agent, partner or employee of AMS, AFIG Wholesale or the Mortgagee; ... " 135 The statement in clause 3.1(a) is a relevant factor in determining whether a relationship of principal and agent existed between AFIG (and therefore AMS) and The Mortgage Group. It is not decisive. If the parties have consented to a relationship which the law characterises as one of principal and agent, it is irrelevant that the parties do not recognise it as such and seek to disclaim that relationship (Garnac Grain Company Incorporated v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137). 136 Whilst it has been said that a finance broker seeking a lender on behalf of borrowers is prima facie the agent of the borrower (Micarone v Perpetual Trustees [1999] SASC 265; (1999) 75 SASR 1 at [632]) the question in each case depends upon the terms of the intermediary's engagement. It is clear from the number of cases in which it has been held that a finance intermediary is an agent of the lender, or where intermediate appellate courts have differed on that question, that any such presumption does not have the same force as a presumption that an insurance broker is the agent of the insured rather than the insurer (e.g. Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; Permanent Trustee Company Limited v O'Donnell [2009] NSWSC 902; Micarone v Perpetual Trustees; Bartle v GE Custodians Ltd [2010] NZCA 174). 137 As adverted to above, the role of the Mortgage Group was described in the Correspondent Deed as follows: " 4. ROLE OF CORRESPONDENT The role of the Correspondent includes (without limitation) the following: (a) sourcing and interviewing prospective Borrowers and Guarantors; (b) processing and assessing each Loan Application; (c) obtaining a valuation from an Approved Valuer using approved standard valuer instructions; (d) obtaining Mortgage Insurer Approval; (e) following AFIG Wholesale approval of the loan, preparing and issuing a Loan Proposal; (f) instructing an Approved Solicitor to act for the Trustee; (g) coordinating settlement of Mortgages; (h) managing Loans after settlement, including correspondence with Borrowers and Guarantors, requests for variations and managing loans in default; and (i) all other functions provided for in this Deed and the Operations Manual ." 138 It will be noted that whilst AFIG had the responsibility of deciding whether the loan would be approved, The Mortgage Group was responsible for "sourcing" prospective borrowers, interviewing them and assessing each loan application. The fact that The Mortgage Group was not restricted to sourcing loans for AFIG alone, that is, that it could offer a prospective loan to any lender, does not mean that in carrying out its functions under the Correspondent Deed it was not acting on behalf of AFIG and hence AMS. Clause 2.2 required The Mortgage Group to originate and manage each Mortgage using the same degree of skill and care as would be used by a responsible and prudent mortgagee and in accordance with, inter alia, the deed, the Operations Manual, and any request or direction which AFIG might make or give from time to time. Thus not only in respect of managing a settled loan, but in "originating" a loan The Mortgage Group was subjected to AFIG's direction and control. The Operations Manual contained detailed provisions as to the criteria the loan application was to satisfy and the steps to be taken by The Mortgage Group to assess the loan application. 139 These are indications that the relationship between The Mortgage Group and AFIG was that of principal and agent. There are some contrary indications. Clause 8 of the Correspondent Deed gave The Mortgage Group the power to delegate its powers, obligations and function under the deed. Moreover, clause 3.1(b) prohibited the Correspondent from holding itself out as the agent, partner or employee of AIMS or AFIG or any Mortgagee. 140 Clause 3.2 permitted The Mortgage Group to use stationery, forms, documents, and advertising approved by AFIG provided that it complied with the Operations Manual. Otherwise The Mortgage Group was prohibited from issuing any promotional or advertising material which included the name or logo of AMS, AFIG or any Mortgagee. The Mortgage Group did not use the brand or logo of AFIG or AMS. 141 The Mortgage Group was paid commission by AFIG. It did not receive fees or commission from the plaintiffs. This of course is not decisive. 142 In my view, notwithstanding clause 3.1(a) of the Correspondent Deed and the contrary indications referred to above, having regard to AFIG's control and direction of the manner in which The Mortgage Group was to carry out its functions in processing and assessing each loan application, The Mortgage Group was acting on behalf of AFIG. Payment of $100,000 to Australian Secured Fund 143 On 16 March 2006 AFIG advised that the loan application had been approved. AFIG instructed its solicitor, National Lending Solutions, to prepare the mortgage and loan documentation. This documentation was signed by the plaintiffs on 3 April 2006. The documentation did not include any fresh declaration of income or loan purpose. The plaintiffs signed two pages containing directions as to the payment of the loan advance. The first direction was addressed to Permanent and to National Lending Solutions. It stated: " YOU ARE HEREBY AUTHORISED and directed to pay the proceeds of our loan to: 1. pay your fees and disbursements as set out in the accompanying tax invoice; 2. discharge any existing mortgage; 3. where a loan purpose is the purchase of a property, by paying the proceeds available for that purpose as directed by us or our solicitor for that transaction; and/or 4. as we, our Solicitors or our agents direct. " 144 The next page stated: " In addition to points 1, 2, 3 and 4 shown in 'Direction to Pay' section on previous page, should you require additional cheques or would like surplus funds to be deposited into an external account, please indicate this below: * Balance as follows: ... " 145 There was then space provided for the borrowers to nominate an account into which surplus funds should be deposited. The page was signed by the plaintiffs, but this section was left blank. Accordingly, the plaintiffs directed Permanent and National Lending Solutions to pay the surplus proceeds of the loan after discharging the mortgage to Perpetual in such way as their agent directed. 146 Stefan Allan acted as the plaintiffs' agent on the transaction. The plaintiffs allowed him to give directions for the disbursement of the balance of the loan proceeds. National Lending Solutions argues that The Mortgage Group was also the plaintiffs' agent to give instructions for the disbursement of the loan proceeds. 147 At 9.51am on 7 April 2006 Ms Karen Channell of The Mortgage Group sent an email to Mr Dalbir Bajwa, a solicitor with National Lending Solutions. She advised of certain fees to be collected at settlement and said she would advise Mr Bajwa later that day of a further cheque to be drawn for settlement. 148 Later in the morning of 7 April 2006 Ms Chanell sent a further email to Mr Bajwa stating: " I have received confirmation from Australian Secured Fund Pty Ltd that the amount due to be paid them on settlement by cheque is $100,000. " 149 Stefan Allan was the sole director of Australian Secured Fund. Dennise Allan was the secretary and shareholder. 150 On 10 April 2006 Ms Chanell advised Mr Bajwa: " Re above settlement Australian Secured Fund has indicated that they will attend settlement to pick up cheque, please confirm time and address of settlement location for tomorrow. " 151 Pursuant to the instruction of The Mortgage Group, National Lending Solutions disbursed the net proceeds of the loan by paying $606,189.68 to Perpetual for the discharge of its mortgage; $100,000 to Australian Secured Fund; and $39,377.32 to the plaintiffs. The balance of the loan proceeds was applied in payment of fees and expenses. 152 On 12 April 2006 the plaintiffs received a letter from National Lending Solutions advising that settlement had taken place the previous day and enclosing a schedule showing how the funds were disbursed. James Michalopoulos gave evidence that he was in shock when he saw that a cheque of $100,000 had gone to Australian Secured Fund. He telephoned Jeremy Allan to find out what was going on. Jeremy Allan said he knew nothing about it and would check. 153 Jeremy Allan did not act personally on the giving of instructions for the disbursement of the loan proceeds. The plaintiffs found out that Australian Secured Fund was Stefan Allan's company. Mr Michalopoulos told James that Stefan Allan had told him (Mr Michalopoulos) that he needed the money for court cases to provide extra security for the loan. The plaintiffs took no step to seek to recover the sum of $100,000 from Australian Secured Fund. They made no protest to National Lending Solutions about the payment. They had left it to Stefan Allan to give directions for the disbursement of the balance of the loan proceeds after payment of Perpetual's debt. 154 Jeremy Allan deposed: " TMG's office records show that Mr and Mrs Michalopoulos provided TMG with a direction dated 5 April 2006 to pay $100,000 of the amount of the second loan to Australian Secured Fund Pty Ltd on settlement of the second loan. " He exhibited a copy of the direction to pay. The document exhibited by Mr Allan is a photocopy of a typed letter addressed to Dennise Allan at Australian Secured Fund dated 5 April 2006 stating: " Please be advised that we give permission for $100,000 to be deducted from our home loan refinance settlement advance with the Mortgage Group Pty Ltd to your allocated company Australian Secured Fund P/L or any nominee you advise. We appreciate your assistance in our refinance. " The document bears what purport to be signatures of Mr and Mrs Michalopoulos. However, the photocopied signatures are badly degraded. The bottom of Mrs Michalopoulos' signature is not reproduced. I infer that if it were fully reproduced it would overlap with the typed name of Mrs Michalopoulos. Mr and Mrs Michalopoulos both swore affidavits in which they said that although their signatures on the letter dated 5 April 2006 resembled theirs, they did not place their signatures on the document. They did not adhere to that evidence in cross-examination. In cross-examination they said that they could not say whether or not the signatures appearing on the document were their signatures. The letter might have been included in the documents Stefan Allan gave them to sign. 155 No-one from The Mortgage Group gave evidence as to how the letter dated 5 April 2006 was obtained. The original was not produced. Jeremy Allan gave evasive (T511.27) and contradictory evidence (T511.34, T512.6, T512.43) as to his finding the document. His ultimate position was that he found the document in another borrower's file. There are grounds for suspicion about the authenticity of the signatures. 156 Mr Kabilafkas, counsel for National Lending Solutions, submitted that I should find that the letter dated 5 April 2006 had been signed by the plaintiffs, was provided to Ms Channell shortly after its execution and that Ms Channell placed it in the file from where the original was somewhere misplaced. He rightly submitted that there is no evidence of Ms Channell's dealing directly with the plaintiffs. Ms Channell must have been instructed by Stefan or Dennise Allan. He submitted that I should infer that as an honest and senior employee of The Mortgage Group she required the direction to be confirmed in writing under the hand of the plaintiffs. Counsel submitted that I should infer that the reason Ms Channell's instructions to Mr Bajwa of 7 April 2006 came in two stages, was that she initially had oral instructions from Dennise or Stefan Allan, but insisted that those instructions be confirmed in writing. 157 There are two difficulties with this submission. First, Ms Channell was not called. There was no explanation for that. Secondly, if Ms Channell had received the letter of 5 April 2006, one would expect her to say that she had instructions from the borrowers that Australian Secured Fund was to be paid $100,000 on settlement, not that she had confirmation from Australian Secured Fund that it was to be paid that sum. 158 I am not satisfied that the plaintiffs signed the letter dated 5 April 2006. I make no finding of forgery against Stefan or Dennise Allan or Jeremy Allan. The evidence would not permit such a serious finding. Nonetheless, and notwithstanding the plaintiffs' concession that the document might have been one Stefan Allan had them sign, I do not find that it was. The letter was dated after the documents signed on 3 April 2006. The plaintiffs gave no evidence of having been asked to sign the letter on a later occasion. Mr Michalopoulos understood that Stefan Allan was going to direct the balance of the loan proceeds to the plaintiffs. Stefan Allan would have run a risk of being refused if he had asked the plaintiffs to sign the letter. There are, as counsel submitted, difficulties with the appearance of the document. 159 Accordingly, the authority for Permanent to pay $100,000 to Australian Secured Fund depends on the direction signed by the plaintiffs on 3 April 2006 to pay as the plaintiffs' agent directed. The plaintiffs themselves gave no instructions to The Mortgage Group as to how the balance of the loan proceeds should be disbursed. Although Stefan Allan was the plaintiffs' agent to give such instructions, he had no actual authority to direct payment to Australian Secured Fund. Even if his actual authority had not been limited by his express assurance that the proceeds would be paid to the plaintiffs' account (see [112] above), the power to direct payment of the balance of the proceeds would not extend to paying them for his own benefit, or that of his wife or their company, unless such a power were conferred expressly. Nor would Stefan Allan have ostensible authority to direct payment of his principal's money for his own benefit (Tobin v Broadbent (1947) 75 CLR 378 at 401; Sweeney v Howard [2007] NSWSC 852; (2007) 13 BPR 24,381 at [55]-[57]). 160 The instruction for payment was given by The Mortgage Group. National Lending Solutions contended that The Mortgage Group was the plaintiffs' agent for the purpose of giving instructions to Permanent's solicitors for the disbursement of the proceeds. The plaintiffs did not retain The Mortgage Group themselves. They never dealt with anyone from that company. They were aware that Stefan Allan was dealing with The Mortgage Group on their behalf. From time to time The Mortgage Group referred to the plaintiffs as its "clients". For example, on 4 April 2006, The Mortgage Group wrote to National Lending Solutions and, referring to the plaintiffs, said "This client has been with our company several years now." 161 Whether there was a relationship of principal and agent between the plaintiffs and The Mortgage Group depends upon the proper construction of any agreement between Stefan Allan acting for the plaintiffs and The Mortgage Group. But there is no evidence as to the terms of any agreement made between Stefan Allan for the plaintiffs and The Mortgage Group in relation to the application for the Permanent loan, other than the submission of the loan application. There is no evidence that Stefan Allan asked The Mortgage Group to act for the plaintiffs by submitting the application to whichever lender might provide the best terms. Inferences can be drawn from the fact that the loan application was given to The Mortgage Group, that the plaintiffs were told that the loan would be sought through Jeremy Allan and the text of Jeremy Allan's letter to AFIG set out at para [122] above. Those facts do not support a conclusion that The Mortgage Group was acting as the plaintiffs' agent in obtaining the loan or giving the direction to pay. The Mortgage Group acted as agent for AFIG in assessing the loan application. 162 If The Mortgage Group were the plaintiffs' agent it would not necessarily follow that the plaintiffs were bound by its direction to pay. On its proper construction the written authority given by the plaintiffs to pay the balance of the loan proceeds as directed by their agents was to pay in accordance with a direction given by the plaintiffs' agents having actual or ostensible authority to do so. The Mortgage Group had no actual authority to direct payment to Australian Secured Fund. It could not rely on Stefan Allan having ostensible authority to direct the payment. 163 Nor, if it were the plaintiffs' agent, would The Mortgage Group have had ostensible authority to direct payment to Australian Secured Fund. On that assumption, the plaintiffs did not hold The Mortgage Group out as having any authority, except as is customarily exercised by a finance broker in its position. I accept that that would include giving instructions on behalf of the borrowers as to how the loan proceeds should be paid. But The Mortgage Group did not purport to give any instruction on behalf of the plaintiffs as to how the loan proceeds should be paid. The Mortgage Group confirmed that it had instructions from the payee, Australian Secured Fund, for disbursement of the proceeds, not that it had such instructions from the borrowers. For Permanent to be able to rely on ostensible authority of The Mortgage Group, it would have to show that through its agent, National Lending Solutions, it relied upon a representation made by the plaintiffs (including by their conduct) that The Mortgage Group had authority to give the instruction on the plaintiffs' behalf. In Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503, Diplock LJ said: " An 'apparent' or 'ostensible' authority ... is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed on him by such contract. ... The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. " 164 The Mortgage Group made no representation that it was giving the direction on behalf of the plaintiffs. Mr Bajwa deposed that The Mortgage Group provided all instructions on behalf of the plaintiffs and arranged for them to provide him with the requisite documents. This was his usual practice when dealing with clients of The Mortgage Group. He did not give evidence that when The Mortgage Group directed payment of $100,000 to Australian Secured Fund, he believed it had authority from the plaintiffs to do so. He did not take any steps to ascertain whether the confirmation Ms Channell said had been given by Australian Secured Fund to pay $100,000 to it had resulted from any direction from the plaintiffs. 165 If by their conduct the plaintiffs had held out The Mortgage Group as their agent for the purpose of giving directions for the disbursement of the loan proceeds, and if the very fact of giving directions impliedly conveyed that The Mortgage Group was acting on instructions of the plaintiffs, nonetheless, the plaintiffs would not be estopped from denying The Mortgage Group's authority to give the direction for payment to Australian Secured Fund where National Lending Solutions did not reasonably rely upon The Mortgage Group's having authority to do so. In my view there was no such reasonable reliance given that The Mortgage Group did not say it was acting on instructions of the plaintiffs, but instructions of the payee. 166 No party submitted that the plaintiffs ratified the direction for payment given by The Mortgage Group, or were estopped from denying its authority to give that direction, or were estopped from challenging the payment made by National Lending Solutions, because they made no complaint to NLS about the way the loan proceeds were disbursed. 167 For these reasons I do not consider that Permanent had authority from the plaintiffs to pay $100,000 of the loan proceeds to Australian Secured Fund. 168 The loan agreement with Permanent was signed by the plaintiffs on 3 April 2006. The contract became binding prior to the loan proceeds being disbursed. It was a term of the loan contract that Permanent would pay the "Amount of Credit", that is, $750,000, in accordance with the plaintiffs' direction. The mortgage secured what the loan contract defined as "the Balance", being the difference between all amounts credited and all amounts debited to the plaintiffs' account opened for the purposes of the contract. Clause 4.2 of the terms and conditions of the loan provided that Permanent could debit the amount of the "Housing Loan" to the plaintiffs' "Housing Loan Account". The "Housing Loan" was defined to mean "the principal amount that we lend to you under a Housing Loan Account". The definition of "Housing Loan Account" relevantly meant each account designated in the loan agreement to be a housing loan account. Because Permanent did not pay all of the $750,000 on the plaintiffs' direction or the direction of their agent having actual or ostensible authority to do so, the plaintiffs did not become liable to repay the $100,000 paid to Australian Secured Fund. It was not an amount that had been lent to the plaintiffs. 169 This raises a difficulty with the pleadings. The plaintiffs alleged that the loan agreement between them and Permanent and the mortgage given to Permanent were unjust contracts within the meaning of s 7 of the Contracts Review Act. The statement of claim gave particulars of that allegation which included that the loan was obtained for the purpose of an improvident and speculative investment with the "mortgage manager and/or persons associated with the mortgage manager" and that "the money was not paid to the Plaintiffs". Further particulars were sought of those allegations. In answering that request for particulars the plaintiffs' solicitors contended that $100,000 was paid to Australian Secured Fund and that this was a misappropriation of funds. This was a particular of the allegation that the loan was taken for the purposes of an improvident and speculative transaction. The plaintiffs also gave particulars of an allegation that Permanent was willing to lend on the value of the security and was indifferent to the purpose of the loan where funds were handed over to the "mortgage introducer/mortgage manager in circumstances where the purported investment was either fraudulent or extremely improvident". As additional particulars of that allegation the plaintiffs said that the $100,000 was handed over to the "mortgage introducer/mortgage manager". The plaintiffs also gave additional particulars of an allegation that the defendants did not receive a "benefit" from the Permanent loan by contending that $100,000 was paid to a company without their consent or direction. They further said that the plaintiffs had not authorised the payment. In support of the allegation that "the money was not paid to the plaintiffs" the plaintiffs gave further particulars that $100,000 was not paid to them. 170 During the course of counsel's opening, I queried the sufficiency of the allegations then pleaded that the plaintiffs did not give authority for the disbursement of $100,000 to Australian Secured Fund. After considering that question counsel advised (T18) that he wished to add a particular of the existing allegation that the contract of loan and mortgage were unjust contracts, that $100,000 of the advance was paid to Australian Secured Fund without the authority of the plaintiffs. He said that the plaintiffs would not be alleging "a new freestanding allegation". The additional particular was added. 171 The difficulty is that there is nothing in the fact that the moneys were paid without the plaintiffs' authority to make the loan contract or the mortgage, or any provision of the contract or mortgage, unjust in the circumstances relating to those contracts at the time they were made. Rather, the plaintiffs did not become liable to repay the full amount advanced by Permanent and the mortgage does not secure more than $650,000 of the total amounts advanced by Permanent and interest and other charges. The contracts are not unjust. Rather the plaintiffs are not liable to repay the whole amount of the advances. No cause of action is pleaded in respect of that. 172 However, Permanent made no submissions about this. In its second cross-claim against National Lending Solutions it alleged, inter alia: " 2. Pursuant to a loan agreement made in writing between the Plaintiffs and the Cross-Claimant on 3 April 2006 ('the PCL Loan Agreement') the Cross-Claimant made payments in the following amounts to the following entities:- ... Australian Secure [sic] Fund Pty Ltd $100,000.00 ... 7. The Further and Better Particulars to the Statement of Claim contain an allegation that the disbursement of some funds advanced pursuant to the PCL Loan Agreement was not authorized by the Plaintiffs. 8. If it is held that, as a result of the matters ... referred to in the Further and Better Particulars to the Statement of Claim, the Cross-Claimant is not entitled to repayment by the plaintiffs of any ... of the amounts referred to in paragraph 2 above and other amounts including interest payable pursuant to the terms of the PCL Loan Agreement ... the Cross-Claimant pleads as follows ... 19. If it is proven by the Plaintiffs that any part of the proceeds of the PCL Loan Advance was disbursed other than in accordance with the instructions of the Plaintiffs (as is alleged by the Plaintiffs) then any such disbursement by the Second Cross-Defendant of the proceeds of the PCL Loan Advance was in breach of the retainer ... " 173 In my view, notwithstanding the limited terms of the plaintiffs' pleading, a real issue fought at the hearing was whether or not the plaintiffs authorised the disbursement of $100,000. It was assumed that if the answer to that question were no, then, to that extent, the plaintiffs would be entitled to relief. The fact that the plaintiffs did not plead the cause of action which would give them that relief should not disentitle them from it. However the appropriate form of relief is not any order under s 7 of the Contracts Review Act but a declaration that the mortgage secures only $650,000 of the $750,000 advance and interest thereon and other charges. 174 Because the plaintiffs are entitled to that measure of relief, it is necessary to deal with Permanent's cross-claims against The Mortgage Group and National Lending Solutions. Permanent's cross-claim against The Mortgage Group 175 Permanent's cross-claim against The Mortgage Group was based on representations made by The Mortgage Group when it submitted the loan application on 9 March 2006. Permanent pleaded that by submitting the information and documents with the loan application, The Mortgage Group engaged in trade or commerce in conduct that was misleading or deceptive or likely to mislead or deceive in breach of s 52 of the Trade Practices Act. There was no separate pleading against The Mortgage Group in respect of The Mortgage Group's having given instructions to Permanent's solicitor for the disbursement of the loan proceeds. Rather, the claim against The Mortgage Group was pleaded on the basis that had The Mortgage Group not engaged in misleading or deceptive conduct in submitting documents and information in relation to the proposed loan, no loan would have been made. 176 I accept that The Mortgage Group did engage in misleading or deceptive conduct in trade or commerce in submitting the documents in support of the loan application and in the terms of the facsimile provided by The Mortgage Group to AFIG on 9 March 2006. The enclosed documents contained the false representations referred to in para [18] above. In the covering facsimile, Jeremy Allan for The Mortgage Group certified that the "mortgage to be purchased" complied with the criteria set out in the Operations Manual and that the mortgage loan would meet all the criteria in the Operations Manual. He stated that after reasonable inquiries, he was not aware of any reason why the plaintiffs might be unable to pay in accordance with the terms of the loan without substantial hardship. He made no reasonable inquiries into the plaintiffs' ability to pay the loan. He simply accepted the statements on the loan application as to Mr Michalopoulos' income. He made no inquiry to ascertain whether what was stated was the fact. As a matter of fact, the mortgage loan did not meet the criteria in the Operations Manual. A paramount requirement was that the borrower be able to repay the loan without substantial hardship. That was not the case, and Jeremy Allan made not inquiry to ascertain whether it was the case. In the facsimile of 9 March 2006 The Mortgage Group also certified that the information contained in the loan application and in all attachments was correct. But the information was false in critical respects. 177 The Mortgage Group was not a mere conduit to convey representations made by others. It endorsed the representations in the application (Butcher v Lachlan Elder Realty (2004) HCA 60; (2004) 218 CLR 592 at 605 [40]). It is clear that The Mortgage Group engaged in misleading or deceptive conduct in trade or commerce. AFIG relied upon the information contained in the loan application. AFIG was Permanent's agent. 178 The question then is whether Permanent can recover against The Mortgage Group as damages for misleading or deceptive conduct the sum of $100,000 which it paid to Australian Secured Fund. The question is what damage was suffered by Permanent "by" conduct of The Mortgage Group in contravention of s 52. 179 Had The Mortgage Group not engaged in misleading or deceptive conduct, Permanent would not have advanced $750,000 to the plaintiffs. It is entitled to recover from the plaintiffs $650,000 with interest as provided for in the loan contract. No evidence or submissions were directed to the question of how the $750,000 intended to be advanced to the plaintiffs or at their direction would have been deployed had AFIG not approved the loan. I infer that the moneys would have been lent to other borrowers on similar terms. Therefore I conclude that but for The Mortgage Group's having conveyed the misrepresentations in the loan application to AFIG and having certified that the statements in the loan application were correct and had been checked, Permanent would not have made the loan. Instead the moneys would have been lent on similar terms to another borrower or borrowers. The Mortgage Group did not submit that Permanent's inability to recover $100,000 from the plaintiffs was not caused by the conduct that induced Permanent through AFIG to make the advance of $750,000. 180 The measure of damages under s 82 of the Trade Practices Act is not always the difference between the position in which the plaintiff would have been had he or she not paid money or transferred property in reliance on a representation that it is misleading or deceptive and the position in which he or she finds himself or herself. The measure of damages may be the difference between the outlay the plaintiff understood he or she was liable to make as a result of the representations made and the obligation in fact incurred (Murphy v Overton Investments Pty Limited [2004] HCA 3; (2004) 216 CLR 388). But it is unnecessary to pursue such an analogy in the present case. I infer that by conveying the representations in the loan application and asserting that those representations had been checked and there was no reason to disbelieve their truth, The Mortgage Group caused Permanent to suffer the loss of the difference between the amount advanced (and interest) and the amount it is entitled to recover (and interest). Had a contrary argument been put based on March v E & MH Stramare Pty Limited (1991) 171 CLR 506 that the "but for" relation was not a sufficient causal connection between the relevant loss and the impugned conduct, Permanent could have sought leave to amend its cross-claim to plead that the loss of $100,000 was caused by The Mortgage Group's direction to pay without the plaintiffs' authority. No such submission was advanced and accordingly the question of amendment did not arise. As the matter was argued, I consider that Permanent has established a sufficient causal connection between the conduct of The Mortgage Group that contravened s 52 of the Trade Practices Act and its damage being its inability to recover $100,000 of the advance it made. 181 As I have said, in the absence of other evidence I infer that the amount of $750,000 would have been lent to another borrower on similar terms as the moneys were lent to the plaintiffs. Permanent's damages against The Mortgage Group include the interest at the lower rate on the amount of $100,000 that is not recoverable from the plaintiffs. It is not entitled to interest at the higher rate under the loan contract with the plaintiffs following default because it is not to be inferred that it would have earned interest at those higher rates had the moneys been advanced to a different borrower. 182 Counsel for The Mortgage Group submitted that if it had any liability under the second cross-claim, then the principles of proportionate liability under s 87CD of the Trade Practices Act applied. Section 87CD provides: " 87CD Proportionate liability for apportionable claims (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss; and (b) the court may give judgment against the defendant for not more than that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim: (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part; and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant. (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law; and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. (5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise. " 183 Permanent's claim against The Mortgage Group is an "apportionable claim" because it is a claim for economic loss caused by conduct done in contravention of s 52 (s 87CB(1)). In s 87CD a "concurrent wrongdoer" means a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the damage or loss that is the subject of the claim (s 87CB(3)). A defendant in proceedings involving an apportionable claim is required to give notice to the plaintiff (or in this case the cross-claimant, Permanent) of the identity of the person and the circumstances that are said to make the other person a concurrent wrongdoer in relation to the claim (s 87CE). 184 In its defence to the second cross-claim The Mortgage Group did not allege that any person other than Permanent itself contributed to Permanent's loss. It alleged: " 14. ... (ii) says that if the Cross-Claimant suffers any loss as claimed such loss was contributed to by the Cross-Claimant's conduct, inter alia, that it: a. failed to put in place any procedures, protocols and/or systems to ascertain the veracity of information provided by Plaintiffs, or otherwise that any such procedures, protocols and/or systems were inadequate to ascertain the bone [sic] fides of such information or representations as provided by the Plaintiffs, their agents, servants or otherwise; b. failed to conduct any due diligence in relation to the material, information or representations of the Plaintiffs, their agents, servants or otherwise for a loan with the Cross Claimant; b. [c.] failed to check, adequately or at all, the material, information or representations of the Plaintiffs, their agents, servants or otherwise contained in bone fide information; c. [d.] engaged in risky lending practices by lending money to the Plaintiffs without taking adequate, prudent and/or reasonable steps to verify the accuracy of information provided; and d. [e.] was careless in processing the so-called PCL Loan Application, and lending money to the Plaintiffs in reliance on information contained in and associated with that Application. " 185 This defence did not invoke a claim for proportionate liability for apportionable claims. Rather, it claimed contributory negligence against Permanent. Under s 87CD(3) in apportioning responsibility between defendants in proceedings the court is to exclude that proportion of the damage or the loss in relation to which the plaintiff is contributorily negligent under any relevant law (s 87CD(3)(a)). The Mortgage Group's defence to the cross-claim did not seek to apportion responsibility between defendants to the cross-claim. 186 In any event, I do not consider that Permanent was contributorily negligent. The particulars of contributory negligence appear to contend that it was negligent for Permanent to rely on The Mortgage Group to carry out its obligations under the Correspondent Deed without carrying out checks to ascertain that The Mortgage Group had properly performed its tasks. There was no evidence that Permanent, through AFIG, should have put in place procedures to protect itself against The Mortgage Group's not carrying out with due diligence its functions under the Correspondent Deed. I reject the pleaded contention that AFIG was negligent or careless in its processing of the loan application. I see no reason why AFIG should not have relied on the loan application and on The Mortgage Group's certification that the information in the application was correct. 187 Accordingly, The Mortgage Group is liable to pay damages to Permanent in the amount of $100,000 and interest at the lower rates under the plaintiffs' loan contract. No further interest is to be included in the judgment pursuant to s 100 of the Civil Procedure Act. Cross-claim against National Lending Solutions 188 Permanent alleged that it was a term of National Lending Solutions' retainer that NLS would not disburse any proceeds of the loan advance other than in accordance with the instructions of the plaintiffs. NLS denied that this was a term of the retainer. It alleged that the relevant term of its retainer was that it would take reasonable care not to disburse any proceeds of the loan advance, except in accordance with the directions of the plaintiffs or their solicitor or agent. Permanent did not allege that if this were the term of the retainer, NLS breached the term by failing to take reasonable care. Rather, Permanent alleged that if the plaintiffs proved that any part of the proceeds of the loan advance were disbursed otherwise than in accordance with their instructions then such disbursement by NLS was a breach of the retainer. It was on this, rather than on whether NLS exercised reasonable care, that issue was joined. 189 Subject to the terms of the contract of retainer a solicitor's obligation is to act with reasonable care and skill in the discharge of the retainer (Winnote Pty Ltd (in liq) v Page [2006] NSWCA 287; (2006) 68 NSWLR 531 at [84]; Trust Co of Australia v Perpetual Trustees WA Limited (1997) 42 NSWLR 237 at 247-248; Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172 at [29]). A contract of retainer will not readily be construed as imposing an absolute obligation on the solicitor rather than an obligation to exercise reasonable skill and care (Midland Bank plc v Cox McQueen [1999] EWCA Civ 656; Mercantile Credit Company Limited v Fenwick [1999] EWCA Civ 778; UCB Corporate Services Limited v Clyde & Co [2000] 2 All ER (Comm) 257). In each case it will be a question of construction of the contract of retainer. 190 National Lending Solutions was retained to act for Permanent by a letter from AFIG dated 16 March 2006. The letter was in the following terms: " INSTRUCTION TO SOLICITOR AFIG LOAN REFERENCE NUMBER 1114498 BORROWERS: Theodoros Michalopoulos Aspasia Michalopoulos AFIG Wholesale is pleased to confirm acceptance of this qualifying mortgage/loan as detailed in the attached Schedule, subject to any special conditions set out therein. The Approved Solicitor is hereby instructed to prepare and serve the loan contract, mortgage(s) and any other ancillary documents and also to settle the loan, in accordance with the AFIG Wholesale Solicitors Pack. To assist in completing the relevant documents, we attach copies of the following: 1) Schedule 2) Valuation For regulated loans, please ensure compliance with section 171 of the Consumer Credit Code. For unregulated loans, the service of documents is not subject to these requirements. Please note that the Correspondent and not AFIG Wholesale or PCL is primarily responsible for your costs, whether or not this matter proceeds to settlement. Some or all of these costs may be recoverable from the borrower(s), if appropriate agreements have been made by the Correspondent. ANY QUERIES ARE TO BE DIRECTED TO THE CORRESPONDENT " 191 Mr Kabilafkas for NLS submitted that the document called the "AFIG Wholesale Solicitors Pack" in accordance with which NLS was required to settle the loan was not placed into evidence. However, Mr Blank, the head of collections for AFIG, exhibited a copy of what he called the AFIG Wholesale Solicitors Pack. This was part of AFIG's Operations Manual. It was a section of the manual headed "AFIG Wholesale Operations Manual Solicitor Processes and Management of Loans (including variations/discharges/default)". I infer that the reference to the "AFIG Wholesale Solicitors Pack" was a shorthand expression for this section of the Operations Manual. 192 The manual included the following terms under the heading "7. The Solicitor's Role": " 7.2 General AFIG Wholesale via the Correspondent engages an approved solicitor to act on behalf of the Trustee in relation to the documentation and settlement of loans and mortgages. ... The solicitor's primary point of contact is the Correspondent. All enquiries regarding the loan are to be directed to the Correspondent who will in turn liaise with AFIG Wholesale if necessary. The Correspondent has an overriding responsibility to ensure that the approved solicitor undertakes all tasks and obligations set out in the AFIG Wholesale Operations Manual. 7.3 Take Precautions to Avoid Identity Fraud Given the recent occurrences of identity fraud, Panel Solicitors must take reasonable precautions to ensure that the transaction is genuine. ... ... 7.4 Verify Use of Loan Funds As further measures to address possible fraud, the solicitor must ensure that disbursement of loan funds is in accordance with the stated loan purpose. Special attention would be required if for example, settlement cheques are directed to be paid to parties other than the vendor, outgoing mortgagor, the borrower and/or the usual statutory authorities, etc. ... 7.7 The Solicitor's Certificate The solicitor is to undertake all actions specified below and certify to that effect using the Solicitor's Certificate ('Solicitors' Section) with respect to each mortgage. No changes or alterations are allowed. ... The solicitor is to conduct the necessary searches and enquiries to ensure that the Trustee obtains good title to the mortgage and the mortgagor has good unencumbered title to the mortgaged property. In doing so, the solicitor is to take into consideration the location, type of property and loan purpose, ie purchase or refinance. ... By completing the Solicitor's Certificate, the solicitor provides the following certifications, undertakings and acknowledgements in respect of each mortgage which the solicitor acts for AFIG Wholesale and the Trustee and set out in the schedule to the Solicitor's Certificate (' Mortgage '). Words and expressions which are defined in the Mortgage have the same meanings when used in the Solicitor's Certificate. Certification We certify that: ... Undertakings We give the following undertakings to the Beneficiaries: (a) ( Not disburse moneys ): not to disburse any of the settlement funds other than to settle the Mortgage, or pay costs and expenses associated with settling the mortgage which are approved of by AFIG Wholesale or the Trustee and in particular we undertake not to disburse any of the settlement moneys to pay any insurance premium for any insurance policy required to be taken out under a Secured Agreement (other than policies of lenders mortgage insurance); ..." 193 NLS provided a solicitor's certificate on 7 April 2006. It was addressed to Permanent, AFIG and The Mortgage Group, each of whom was described as a "beneficiary". The certificate stated: " We hereby provide the certification, undertakings and acknowledgements set out in 'The Solicitor's Certificate' section of the AFIG Wholesale Operations Manual in respect of each of the mortgage(s) described in the schedule to this Certificate (the ' Mortgage '). You are authorised and requested to ensure funds are available by way of inter-bank transfer to this firm's trust account to enable settlement to proceed on the settlement date specified below. SCHEDULE TO SOLICITOR'S CERTIFICATE SETTLEMENT DATE: Tuesday, 11 April 2006 BORROWER/S: Theodoros Michalopoulos and Aspasia Michalopoulos MORTGAGOR: Theodoros Michalopoulos Aspasia Michalopoulos PROPERTY: 35 Birrell Street, Queens Park NSW 2022 Auto Consol 6944-172 GUARANTOR: Not applicable LOAN AMOUNT: $750,000.00 FUNDS REQUIRED AT SETTLEMENT: $750,000.00 ... " 194 Neither the Operations Manual, nor the undertaking given in the solicitor's certificate as to disbursement of loan proceeds, contains a term requiring NLS to ensure that the loan proceeds were disbursed in accordance with the plaintiffs' directions, or in accordance with the directions of the plaintiffs or their solicitors or agents. Clause 7.4 of the Operations Manual required the solicitor to ensure that the disbursement of loan funds was in accordance with the stated loan purpose. NLS is not sued for breach of that stipulation. Undertaking (a) was that the solicitor would not disburse any of the settlement funds other than to "settle the Mortgage" or to pay approved costs and expenses associated with settling the mortgage. The "Mortgage" is the mortgage set out in the schedule to the solicitor's certificate. That mortgage is the mortgage to be given to Permanent, not the mortgage to be discharged. It is not clear what is meant by the expression "settle the Mortgage". Permanent made no submissions about this part of the Operations Manual. Whatever the expression means, the solicitor was not required to undertake not to disburse any of the settlement funds otherwise than on the direction of the borrowers or their agents. 195 Therefore no term as alleged by Permanent is an express term of the contract of retainer. Such a term would not be implied. Rather, the implied term would be that contended for by NLS. As Permanent did not allege a breach of such an implied term, the claim against NLS should be dismissed. 196 In a number of places in these reasons I have dealt with matters otherwise than on the basis of the pleadings. However, the pleading issue concerning the alleged breach of retainer was clearly flagged by NLS, including in its opening outline of submissions delivered before the hearing. In those submissions NLS said "NLS admits that it owed a duty, in contract and in tort, to use reasonable care and skill in paying the loan advance only in accordance with the instructions of the Plaintiffs or Permanent. Breach of such duty, however, has not [been] pleaded against NLS". As Mr Kabilafkas for NLS submitted, had Permanent alleged breach of the implied term to exercise reasonable care in disbursing the loan proceeds, evidence might have been expected to be called on matters such as the common practice amongst solicitors regarding the payment of settlement funds to third parties. Neither Permanent nor NLS led evidence in chief directed to the question of whether NLS exercised reasonable care. I allowed some questions in cross-examination which were relevant to that question, as well as to the question of whether Mr Bajwa was relying upon any ostensible authority of The Mortgage Group to give instructions for the plaintiffs. That does not mean that the question of negligence became an issue in the hearing. 197 It follows that Permanent's cross-claim against National Lending Solutions should be dismissed. As the question whether National Lending Solutions failed to exercise reasonable care was not an issue in the hearing, questions of contributory negligence and apportionability of claims do not arise. Those questions did not arise on The Mortgage Group's defence to Permanent's cross-claim. The Mortgage Group did not plead that its liability was reduced by reason of a claim that Permanent had against National Lending Solutions for breach of an obligation to use reasonable care in disbursement of the loan proceeds. Remaining cross-claims 198 Permanent cross-claimed against Perpetual if it were held that the Perpetual mortgage was unjust or void, and that Perpetual had no entitlement to be repaid by the plaintiffs. In the light of my findings, no such claim arises against Perpetual. 199 Permanent also cross-claimed against the plaintiffs in respect of the sum of $39,377.32 paid to them. Again, that claim does not arise. 200 Perpetual brought a cross-claim against James Michalopoulos, Stefan Allan, Jeremy Allan, Dennise Allan and The Mortgage Group seeking indemnity, or alternatively, contribution, in respect of any judgment against Perpetual. As the plaintiffs' claim against Perpetual fails, its cross-claim will be dismissed. 201 The fourth cross-claim was brought by National Lending Solutions against The Mortgage Group. It claimed damages pursuant to s 12GF of the Australian Securities and Investments Commission Act or s 68 of the Fair Trading Act 1987 (NSW), or alternatively, indemnity or contribution. That claim was premised upon National Lending Solutions being liable to Permanent. As Permanent's claim against National Lending Solutions will be dismissed, the latter's cross-claim against The Mortgage Group will also be dismissed. 202 The fifth cross-claim was brought by The Mortgage Group and by Jeremy Allan against James Michalopoulos, Stefan Allan and Dennise Allan. The Mortgage Group and Jeremy Allan sought an indemnity in respect of any amounts they might be ordered to pay or contribute to Permanent or Perpetual. Jeremy Allan is not entitled to any relief as he is not liable to Permanent. The only claim against Dennise Allan was for contribution or indemnity in respect of Perpetual's cross-claim against The Mortgage Group. As that cross-claim will be dismissed, The Mortgage Group's cross-claim against Dennise Allan will also be dismissed. 203 The Mortgage Group's liability to Permanent arises from its having engaged in misleading or deceptive conduct in submitting the second loan application. In its cross-claim against James Michalopoulos and Stefan Allan, The Mortgage Group alleges that they engaged in misleading and deceptive conduct in breach of s 42 of the Fair Trading Act in connection with the second loan application, or, alternatively, were involved in a contravention by the plaintiffs of s 42 of the Fair Trading Act. 204 The position concerning the claim against Stefan Allan is clear. He completed the loan application which contained the false statements as to the income of the first plaintiff, his occupation, and as to the purpose of the proposed loan. He was aware that the statements were false. He submitted the application to The Mortgage Group. He engaged in misleading or deceptive conduct in trade or commerce and it is a direct result of his conduct that The Mortgage Group is liable to Permanent for $100,000 and interest. The Mortgage Group is entitled to recover from Stefan Allan the same quantum of damages it is liable to pay to Permanent. 205 The claim against James Michalopoulos is not quite so clear. James Michalopoulos did not complete those parts of the loan application form that contain the false statements. I do not find that he was aware of the particular false statements made. However, I do find that he understood that a lender would not be prepared to make an advance of $750,000 to his parents unless the lender was satisfied that they had the capacity to repay. Notwithstanding his denial, I consider that he was aware that the loan application form would be filled out by Stefan Allan making false statements about his parents' income. 206 I infer that it was Stefan Allan, and not James Michalopoulos, who provided the loan application to The Mortgage Group. James Michalopoulos was aware that the application would be provided. James Michalopoulos participated at the meeting with Stefan Allan on or about 31 January 2006 at which the plaintiffs signed documents in his presence. He was actively involved in the investment for which the loan was sought and in the plaintiffs' decision to apply for the loan. 207 Whether James Michalopoulos engaged in trade or commerce in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 42 of the Fair Trading Act turns on the definition of "conduct" in s 4(4) of the Act. Section 4(4) provides: " 4 Definitions (4) In this Act: (a) a reference to conduct is a reference to an act or a refusal to act, including in either case an act that constitutes, or would but for the refusal constitute, making or giving effect to a provision of a contract or arrangement, arriving at or giving effect to a provision of an understanding, or requiring or entering into a covenant, (b) a reference to refusing to do an act includes: (i) a reference to refraining (otherwise than inadvertently) from doing the act, and (ii) a reference to making it known that the act will not be done, and (c) a reference to a person offering to do an act, or to do an act on a particular condition, includes a reference to the person making known a willingness to accept applications, offers or proposals for the person to do the act or to do that act on the condition. " 208 The effect of s 4(4)(a) and (b)(i) is that a person may engage in conduct by refraining, otherwise than inadvertently, from doing an act. In my view James Michalopoulos refrained, otherwise than inadvertently, from disclosing to The Mortgage Group the true employment status and income of his parents. He thereby engaged in misleading and deceptive conduct in breach of s 42. His conduct was in trade or commerce. 209 Further, I consider that James Michalopoulos was knowingly concerned in the plaintiffs' contravention of s 42 of the Fair Trading Act. On any view the plaintiffs signed documents in blank knowing that their signatures were required in order to testify to the correctness of the information. They expected Stefan Allan to fill out the form with incorrect information. They engaged in misleading and deceptive conduct. That conduct was in trade or commerce. James Michalopoulos had sufficient knowledge of the lender's requirements to know that the loan would not be approved were the application to be filled out correctly. He was knowingly concerned in the plaintiffs' breach of s 42. On either basis, he is also liable to pay damages to The Mortgage Group in the same quantum as the damages The Mortgage Group is liable to Permanent. Of course, The Mortgage Group is not entitled to double recovery against Stefan Allan and James Michalopoulos. 210 The Mortgage Group did not cross-claim against the plaintiffs. 211 It may seem curious that the perpetrator of the fraud, Stefan Allan, is liable only to The Mortgage Group and only for the amount that The Mortgage Group is liable to pay Permanent. That, however, is the result of decisions taken by the plaintiffs and Permanent not to sue him. Conclusions 212 The plaintiffs' claim against Perpetual will be dismissed. As between Permanent and the plaintiffs it will be declared that the principal amount owing under the contract of loan is $650,000 and not $750,000. Otherwise the claims of the plaintiffs against Permanent will be dismissed. Permanent is to bring in a calculation of the mortgage debt accordingly. It is entitled to an order for possession of the Birrell Street property. 213 Permanent's cross-claim against National Lending Solutions and against Perpetual will be dismissed. Its claim against the plaintiffs in the second cross-claim will also be dismissed. Permanent is entitled to damages against The Mortgage Group in the amount of $100,000 plus interest calculated at the lower rate under the loan contract. It is not entitled to interest under s 100 of the Civil Procedure Act 2005 (NSW) on that award of damages. 214 The third cross-claim of Perpetual will be dismissed. 215 The fourth cross-claim of National Lending Solutions will be dismissed. 216 The fifth cross-claim of The Mortgage Group against Dennise Allan will be dismissed. The Mortgage Group is entitled to damages against James Michalopoulos and against Stefan Allan in the same amount as it is liable to pay to Permanent. The cross-claim brought by Jeremy Allan will be dismissed. 217 I will stand the proceedings over to a convenient date for counsel for Permanent to bring in short minutes of order in accordance with these reasons. I will then hear argument on costs and on whether there should be a stay of execution of a writ for possession. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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